Why do I need to care about my credit score?

Why do I need to care about my credit score?

August 2, 2021
Credit Score Tips

In Australia, a credit score (or credit rating) is a number that represents how responsible you are as a borrower. Your credit rating is a vital part of understanding your credit health.

A lender will use your credit score to decide whether or not to give you credit or lend you money.

The system of credit reporting in Australia is known as comprehensive credit reporting this means both negative and positive information is included in your credit report.

The information in your credit report is calculated based on some of the following:

  • How much you have borrowed;
  • How many credit applications you have made; and
  • Whether you were on time with repayments.
  • Did you have any non payments, defaults or judgements.

Based on what is in your credit report, your score will be between 0 and 1,200. It is important to note that the score provided to you is only in consideration of your credit report at that time and is subject to change.

You should aim for a credit score that is high. By having a higher rating, you will more likely qualify for the credit you are applying for.

If you have a low credit rating you are more likely to be turned down for approval. If you do get approved your borrowing capacity will be limited.

Here are our top tips to improving your credit score:

  1. Pay on Time

One of the easiest ways to improve your credit score is to make sure that you budget for your bills and pay on time. These bills include your rent or mortgage, utility and credit cards. All payments you have made on credit cards, loans or bills (whether paid on time or not) will show up on your credit report for two years.

  • Think Twice before Applying

It doesn’t matter if you are approved for a loan or credit card, by just applying it will show up on your credit report for the next five years and these applications will affect your credit rating. So always think twice before applying for a new credit card or loan and make sure you approve the criteria to assess your credit score.

  • Ask for Help

If you are feeling overwhelmed and struggling to manage your bills, you should contact your creditors to discuss options for assistance or alternative payment arrangements. Alternatively, you can contact a financial counsellor for help.

You can receive a free credit score and report by contacting any of these credit reporting agencies:

Dunn and Bradstreet: Home – illion

Equifax: https://www.equifax.com.au/personal/products/credit-and-identity-products

Experian: https://www.experian.com.au/order-credit-report/

Illion: https://www.creditcheck.illion.com.au/

You can receive a credit report for free every three months. Moneysmart recommends that you receive a copy of your credit report at least once a year.