Your Credit Score

With less than 30% of Australians knowing their credit score, it’s clear that it’s a confusing topic for many. In this article, we’re going to break it all down for you.

What’s a credit score?
Your credit score, also known as a credit rating, is a number that lenders use to understand your credit risk. They provide a way for a lender to determine how likely or unlike you are to repay your bills. The higher your credit score the better, but if you have a low credit score you can always improve it. You generally have three of them, each for different reasons – which we will talk about in another article.

How are credit scores calculated?
Every credit bureau has a different way of calculating your credit score. They will look at your credit history and make a conclusion based on their algorithm that monitors your financial practices e.g., paying your bills on time, not defaulting on loan payments, etc.

Another term you may hear is credit report, which is different to your credit score. A credit score is comprised of demographics, companies you’ve taken credit out with, the amount of credit you’ve borrowed, how many credit applications or enquiries you’ve completed and overdue payments you’ve had.

What does a credit score mean for you?
Your credit score is an indication of your creditworthiness – and the higher the better. Your creditworthiness is how lenders will determine how dependable you are to repay your debts. The better your creditworthiness, the more likely you are to get lower interest rates and be easily accepted when applying for credit.

Why you should check your score
It’s important to check your credit score, A) for your own records and B) to ensure there are no mistakes on it that could negatively impact you in the long run. If, for some reason, your credit scores aren’t within a close range, it may indicate you have a mistake on your credit report or even identity theft. It doesn’t happen often, but it can, and staying on top of it is the best way to minimise damage to your credit. If something doesn’t seem right to you, contact the credit reporting bureau for clarification.

Ways to boost your credit score

  • Pay your credit card off in full each month or at least make the minimum monthly payment
  • Debt consolidating
  • Limit the number of times you enquire on your credit report
  • Pay your rent, utilities, and other bills on time
  • Remember not all lenders are treated the same

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