Credit Scores

The better your credit score,  the better the choice of lenders, terms and conditions you’ll have.
Lenders in Australia use your Credit Score as one of the measures to make a decision whether to loan you money, how much interest you will pay, and the conditions of the loan.

Knowing your Credit Score is really important as it will assist you to determine which lender is right for you, help you to negotiate a better deal or ultimately assist you to understand why you have been declined (if you have been)

Credit Scores can determine what loan, at what rate from which lender

What’s in a credit file?

In basic terms, a credit report/file is a record of your history of credit. It contains the loans or credit products you currently have, your repayment history, any defaults or adverse history and will have a Score.  Each time you fill out an application for credit, your file is updated.

Your credit report also contains

• Your name (and any aliases)
• date of birth,
• drivers licence number,
• address history
• employer and
• your gender
• Publicly available information (bankruptcies and court judgements)

How do the scores work?

Scores range from 0-1200 depending on the credit reporting agency.
Looking at 3 Australian credit agencies – the credit score range uses Illions categorisations of low, fair, average, very good, excellent.
Credit Score Range Experian Equifax Illion

Correct at time of writing

How is the score determined?

Your score is calculated by agencies using a complex set of algorithms. In basic terms, the calculation is based on your credit patterns and characteristics and type or aspects of credit.

Patterns:

• Number of credit applications in a given period of time eg. If you have applied for 3 loans for the same amount in a short period of time, it can indicate you have been declined. Less enquiries is more favourable than a lot of enquiries, especially over a short period. It doesn’t mean circumstances may not mean that you may apply for a home loan and a car loan at the same time, but separating these can be favourable.
• Negative information such as defaults, late payments, bankruptcies and judgements against you.
• How your credit applications are spread over time. It makes sense that you get a loan for a car, then 2-5 years later get a new car and loan.

Characteristics:

• Your score can be determined by things such as your age, time in employment and how long you have been at your current address.
• How old your credit file is can have an impact. The longer you have had credit, the differing impact it will have on your score.

Type or Aspect

• Your credit score will be impacted by the type of credit and the amount of credit on that product.
• Different credit products have a different level of risk associated with them. For example, multiple credit cards vs a secured personal loan will have a different impact. Similarly, short-term or pay-day loans vs a credit card will have a differing impact.

Get Your Credit File

You can get access to your credit report/file usually within 24-48 hours online. (Paid service) or you can apply via mail or email for a free copy – this service just takes longer (10-14 days)
Visit one of the 3 providers to get your credit report online.

• Experian
• illion
• Equifax

Free Credit Score providers

There are lots of online providers who do ‘free credit score’ reports but we have found these are not as accurate as getting your report directly.

You are entitled to a free copy of your credit report from each credit bureau and there are several credit reporting agencies currently operating in Australia. You can contact one of the 3 providers here

• Experian 1300 783 684
• illion 132 333
• Equifax 138 332

The information in this blog post is general in nature and does not constitute personal financial or professional advice. It is not intended to address the circumstances of any particular individual. We do not guarantee the accuracy and completeness of the information and you should not rely on it.