What’s Your Credit Score?
Credit scores indicate how you manage your money and repay your debt, based on personal and financial information in your credit record. When you apply for credit or a loan, lenders use credit scores to determine whether to approve your application or to lend you money. Additionally, knowing your credit score allows you to negotiate better credit deals or understand credit application rejections. If you’re unsure what your credit score is, or how to access your credit report, here’s a helpful guide.
What is a credit report?
A credit report compiles your credit history from information supplied by credit providers and other sources. You’ll have a credit report if you’ve ever applied for or received credit.
A credit report includes:
- Your personal information – your name, gender, date of birth, driver’s license number, employer, current and previous address.
- Your credit score (credit rating) – the ‘band’ your credit score sits in (for example, low, fair, good, very good, excellent).
- Credit products you’ve had in the past two years – including credit cards, store cards, home loans, personal loans, and business loans.
- Your repayment history includes the amount, due date, frequency, and timeliness of payments, as well as any missed payments and their timing (late by more than 14 days).
- Financial hardship information.
- Defaults on credit cards, loans, or utility bills as well as bankruptcy and debt agreements.
- Credit report requests.
How can you see your credit report?
In Australia, there are three main credit reporting agencies: Equifax, Experian, and illion. You can apply for a free copy of your credit report every three months from one of these websites. Moreover, you can request a free copy if you’ve been refused credit in the previous three months.
Since each agency has different information, you may need reports from all three to see your full credit picture.
Australia’s credit reporting agencies are:
Experian 1300 783 684
illion 132 333
Equifax 138 332
How is your credit score calculated?
Each credit agency uses its algorithm to determine your credit score based on your credit report. The higher the score, the better for you as that means lenders can consider you less risky. That could make a difference to the interest rate you get or the amount the lender will lend to you.
Several things impact your credit score but the most important is repaying your debt on time. Missing repayments or making late repayments will negatively affect your credit score and applying for credit too often. You can boost your credit score by making timely repayments, managing finances to avoid missed payments, and applying for credit judiciously.
How do you fix mistakes in your credit report?
Once you have a copy of your credit report, check that all the debt listed is yours and that your details are correct. If you find an error or any out-of-date information, contact the credit reporting agency to request an amendment.
For low credit scores or black marks that could impact your ability to access future credit, work at repairing your credit report. Regularly checking your credit report and working at repairing any issues – such as defaults or late repayments – will improve your credit score over time.
Why is your credit score so important?
Because lenders use your credit score to determine your creditworthiness, and whether to lend to you or to provide you with credit, having a good credit score is important. It could mean the difference between being approved with a competitive interest rate or being declined entirely.
Seek financial advice promptly if overwhelmed by debt to prevent repayment difficulties that could harm your credit score and access to credit.
To help get your finances back on track with financial advice that’s tailored to your circumstances and situation, get in touch with a Lending Connections broker.