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Financial Fitness Challenge Week 2: Check and improve your credit score

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Welcome to Week 2 of the Finder Financial Fitness Challenge! (Here's Week 1 if you need to catch up.)

During Finder's 4-week Financial Fitness Challenge, we'll share easy ways to get your finances sorted, using the Finder app and the power of technology to help you maximise your money. It's simple and it's 100% free.

This week, we're looking at your credit score.

THIS WEEK'S GOAL: Learn about your credit score and how it affects your finances.

What is a credit score anyway?

You might have heard the term "credit score" before but may not know exactly what it is or what your personal score is. (Don't worry, you're not alone; our Finder research has shown that 72% of Australians don't know this.)

In a nutshell, your credit score is your financial identity. It's a calculation of your credit position, made up of the information that is held in your credit file, which essentially shows your history as a borrower. Depending on your repayment and borrowing history, you will be assigned a score that shows lenders where you stand in terms of your finances.

Why is it important?

Your credit score is what lenders will look at to decide whether they should lend money to you. It shows them how risky you are as a borrower.

Having an excellent credit score may even help you negotiate a better deal when you apply for a loan.

How can I find out my credit score?

The good news is that it's free and easy to find out your credit score using the Finder app that you've already installed. (If you skipped Week 1, install the app now.)

From the main dashboard in the app, tap on the credit score section to set yourself up. You'll need your passport or driver's licence to validate your identity before you can get your score.

Once you're set up, you'll see your credit score on the main app dashboard:

An example credit score in the Finder app

Tap on View your credit report and you'll see a more detailed overview of your credit profile. Tap through to see the factors that were considered when assessing your score.

Factors impacting credit score listed in the Finder app

Some people think that checking your credit score regularly will affect your score. This isn't true at all. In fact, regularly checking your credit score means you are on top of any changes that happen right away.

The Finder app makes tracking your credit score easy. You'll get a monthly reminder of what your score is so that you can see if it's changed.

What does a good credit score look like?

The credit agency that Finder uses is Experian, which uses a scoring system from 0 to 1,000.

There are five credit score bands that your score can fall into. These bands range from "excellent" for scores that are closer to 1,000, down to "weak" for scores that are lower. Here's how the bands work:

  • Excellent: 800-1,000
  • Very good: 700-799
  • Good: 625-699
  • Fair: 550-624
  • Weak: 0-549

If you've got a good credit score, congratulations! You're in good shape. You can learn more about how to keep it healthy in our detailed guide.

Is your number not so great? How can you improve your credit score?

If your credit score is lower than you'd like, don't worry. You can improve it. It might take some time, but it's worth the effort in the long run. So where do you start?

1. Get your credit score and credit report

When you get your credit score and report through Finder, you'll also receive updates if anything ever changes. That way, you can stay on top of your score, as well as see what's impacting any changes.

2. Check your report for high-risk listings

If your score is low, review your credit report and look out for negative listings. These could include multiple credit enquiries in a short space of time, credit cards with high limits, multiple loan accounts and black marks such as late payments, defaults, serious credit infringements and bankruptcies.

Defaults can last on your credit report for five years, while serious credit infringements and bankruptcies will stay on your report for seven years.

3. Remove any incorrect information

If you've found any incorrect listings on your account, you can contact your creditor or the credit reporting agency to have them removed.

4. Identify listings that you can improve

If all of the listings on your credit report are valid, focus on the areas that you can improve:

  • If you have a high credit limit that you aren't using, contact your bank to lower it.
  • If you have multiple personal loans or credit card debts, consolidate them into one debt with a promotional 0% interest rate and pay the whole thing off with no interest.
  • Pay all of your bills on time and create a budget to repay any existing debts.

5. Check your credit score regularly

The Finder app will send you updates about your credit score every 30 days, so you don't have to remember to check it.

This means that you can easily keep a close eye on your credit score and check on any changes to make sure all of your information is correct. If you find a listing that hasn't been updated or something that is wrong, you can quickly get it sorted out.

So there you go. You're now armed with your credit score and you know what you need to do to improve it. Next week, we'll look at how you can make better use of credit cards. See you then!

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