Your credit score is a reflection of your credit report and financial history. Find out what could cause it to fluctuate.
Your credit score is an important number, but it's not fixed. It's calculated and updated using the information in your credit report and is used by lenders to assess your level of risk as a borrower. As an application for a credit card, bill repayment or altered credit limit can impact your credit score, it's important to stay on top your credit score and understand how it can change.
You can read this guide to understand why your score may have changed, the information on your credit report and to get a free copy of your credit score with a monitoring service.
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Why did my credit score change?
Due to the amount of information that is used to calculate your credit score, there are a few reasons why it may have fluctuated. You can see some of the listings that could have reduced or increased your credit score below:
- You applied for a new loan or credit card. Any new applications you make for credit will directly affect your credit score. Keep in mind that you don't need to be approved for the application for it to be listed on your credit report and therefore affect your credit. Applications are considered "hard enquiries" and too many of them in a short period of time will decrease your credit score.
- A listing on your credit report expired. Information is only held on your credit report for a certain length of time, so when a listing is removed from your credit report this will positively impact your credit score.
- You changed your credit limit. Increasing limits on your credit cards or applying for a personal loan top-up (which usually constitutes a new personal loan application) will usually negatively impact your credit score. Similarly, decreasing your credit limit can positively impact your credit score. In both cases, your new credit limit will also be listed on your credit report.
- A credit provider reported new information to a credit bureau. Credit providers don't always immediately report information to credit reporting bureaus, so you may find your credit score change at a seemingly random time. This newly reported information, which can include default information or even credit enquiries, can be the cause.
- New comprehensive data was added to your report. Since 1 July 2018, the Big Four banks have been mandated to report comprehensive data to credit bureaus. Half of this data was added in the 90 days following this date, with 100% of the data to be added by September 2019. This will affect your credit score. Other banks can add it in their own time and the Big Four banks – CommBank, ANZ, Westpac and NAB – can choose which data they add at which time. Find out more here.
- You closed a loan or credit card. Your credit score may improve if you close a loan or credit card. Only credit limits are listed on your credit report, not the current debts on your accounts.
- You made a repayment on a credit account late. Your monthly repayment information is now listed on your credit report and can directly affect your credit score. If you don't make a repayment on time it will cause your credit score to drop, but if you have a low credit score, making monthly repayments on time can have a positive impact on your credit score.
When you order a copy of your credit score through Finder, you'll receive an updated copy of your report each month and will be notified whenever anything changes on your report through a credit monitoring service.
How often is my credit score updated?
Your credit score is updated monthly with repayment information from credit providers, but your credit file is also updated whenever you apply for credit, open or close an account, change your credit limit or go guarantor on a loan. Credit providers also regularly notify credit reporting bodies such as Experian with details of serious credit infringements, defaults, court judgements and bankruptcy information.
How is my credit score calculated?
Your credit score is calculated using a range of information from your credit report:
- Personal information. Your age, how long you have been employed and the length of time you have been at your current address can affect your credit score.
- Credit information. The type of lender you apply for credit with can have an effect on your credit score, as can how much credit you apply for along with the type of credit. All applications you make will be listed, whether they're approved or not.
- Credit enquiries. The number of credit enquiries you've made can affect your credit score, especially if these applications are numerous and in a short space of time.
- Age of your credit file. If your credit file has been recently created you may be seen as more of a risk than someone with a longer-standing credit file. However, this depends on the type of listings on your file.
- Negative listings. Any defaults, outstanding debts, court writs or judgements you have listed on your file would negatively impact your credit score.
- Directorship and proprietorship information. If you are a director or a proprietor, the commercial section of your credit file can have an impact on your credit score.
It's important to note that if a credit provider requests your credit report or credit score (or both) from a credit reporting bureau it will be calculated at the time of the request, so if you've ordered your credit score recently it may not be the same score that is seen by the credit provider. It may have moved up or down depending on your borrower behaviour during that time.
Want to know what your credit score is? You can request a free copy through Finder today.