Your credit score helps to determine your borrowing power – find out how you can keep an eye on it and take action to give yourself the best possible rating.
Your financial history as a borrower is documented in your credit report, and your credit score is calculated using that information. Lenders can use this score, along with your report, to assess the risk involved in lending to you, and how likely it is that you will miss a payment or default on your loan.
Keeping tabs on your credit score can help keep your financial reputation in check and improve the chance of an application being approved. However, keep in mind that you should still check your credit report regularly to get a comprehensive view of your credit history.
What is a credit score?
A credit score is a numerical representation of the information on your credit report. There are a few different credit reporting bureaus in Australia that offer credit scores and each have different credit score ranges. Credit scores from Experian are between 0 and 1,000 and credit scores from Equifax are between 0 and 1,200. The higher your score, the better a borrower you are determined to be.
|Fair / Average||550-624||510-621|
|Weak / Below average||0-549||0-509|
How is my score calculated?
Your credit score is displayed as a number and lenders apply it to their own lending criteria to determine whether you are eligible to borrow from them. Here is a guide to the factors looked at while calculating your credit score:
- The type of credit provider. Lenders apply different criteria to approve your credit application, so the type of credit provider listed on your file is factored in when determining your credit score. For instance, the level of risk associated with a utility company will differ from that of a bank.
- Type and size of credit. Different types of credit will carry different types of risk, as will larger loan sizes and credit limits. However, secured loans such as mortgages, while larger, will be calculated differently.
- The age of your credit report. If you've only had a credit report for a short while it will be treated differently to a credit report that has been active for a number of years. A new credit file may be riskier than an older credit file.
- Credit enquiries. Every time you apply for a loan, credit card or even interest-free finance it will be listed on your credit file. If you have multiple loan applications in a short space of time it could hurt your credit score. Your pattern of credit enquiries over time is also looked at. For instance, if you have a new credit report with multiple credit enquiries it will be treated differently to a credit report with the same number of credit enquiries spread over time.
- Personal details. Details of your employment history, age and length of employment, or even how long you have been at your current home address, could affect the level of credit risk assigned to you.
- Negative credit listings. Equifax looks at the number of serious infringements on your credit report to better understand your financial reliability and hence your credit score. The number of defaults, clearouts or outstanding debts on your credit history directly impacts how high your credit score will be.
- Court writs or default judgments. The number of court judgments, personal insolvencies, writs and bankruptcies or other public documents on your credit file will determine how high your score will be.
How do I check my credit score?
You have a few different options to check your credit score.
- Finder. We offer a free credit score and credit report service powered by Experian. Head to this page to check your full credit report and score. You can also receive updates when something on your report changes and get an updates score every month.
- Equifax. If you want to find out your Equifax Score you'll need to sign up for a one-year package with Equifax, which costs $79.95. You can access your file for free but your credit file can only be seen with the package. The Equifax Starter pack includes instant delivery of your credit report, your Equifax Score plus additional discounted credit reports.
- Dun and Bradstreet. You can check a company's D&B rating as part of the D&B credit report. The rating combines a company's size and balance sheet information to help clients evaluate its financial credibility and risk.
Do I need to check my credit report as well as my credit score?
It's important to keep an eye on your credit file as well as your credit score. As mentioned above, you can check your full credit report and score with finder. You're also entitled to one free credit report check per year from a credit bureau and you can also order a copy if you've recently been denied credit. Keeping an eye on your credit file can help keep the following things in check:
- Checking for incorrect defaults. In some cases, erroneous listings are a reason for a bad credit score. Checking your credit report can reveal incorrect accounts, debts wrongly listed as defaults or debts listed twice, which can then be removed to improve your score.
- Looking for incorrect personal information. Incorrect information about your current address can be detrimental to your credit reputation. This would mean that bills and other notices from credit providers would not reach you, leading to more default listings on your credit file.
- Monitoring instances of identity theft. Check your credit file regularly to ensure that there are no foreign credit applications or bills not known to you, as these might indicate that you have been a victim of identity theft.
Have more questions about your credit score?
Does everyone have a credit score?
No. You will only have a credit score if you have a credit report, and you'll only have a credit report if you've held a credit account that has been reported to a credit bureau.
How can erroneous credit applications be corrected?
Credit applications made by fraudsters or credit accounts that are not yours but are wrongfully listed on your credit report can only be removed by the credit provider who listed them. You should get in contact with the credit provider to remove the listing or follow up with the Credit Ombudsmen if the issue is not resolved.
How can I improve my credit score?
You can do this by spacing out or limiting your credit enquiries, paying all your debts on time and clearing your credit card debt in full every month. Utility bill payments and rent payments should also be made on time.