26 Apr What You Need to Know about Credit Score
Do you understand why your credit score matters each time you apply for a loan?
Lenders check your credit score or credit rating, which appears in your credit report, to understand your credit history and see if they should lend you money. Here we explain some basic facts you need to know about credit scores and how they can possibly affect your mortgage.
What is a credit score?
Your credit score is a number based on an analysis of your credit file, at a particular point in time, that helps a lender determine your credit worthiness. It is used by credit providers, such as banks and credit unions, to help them decide whether to lend you money, how much they will lend you and may sometimes influence what interest rate is offered to you. (from ASIC) This information basically includes:
- Personal identifying information
- Repayment histories on credit cards, loan and mortgages
- Types of credit you already have
- Number of credit enquiries in last 12 months
- Default information
What is a good credit score?
Some lenders don’t usually allow you to see the credit score they give you; they will only advise you on the outcome of your application. Nevertheless, you will be able to access the credit score from your credit file which will be a number between 0 and 1200. A “good” credit score is between 622 and 725, a “very good” score is between 726 and 832 and an “excellent” score is between 833 and 1200.
How is your credit score calculated?
Your credit score can be affected by a range of factors, including:
- Personal details (age, length of employment, how long you’ve lived at your current address)
- Numerous credit enquiries in a short time frame
- Age of credit file
- Overdue debts and defaults
- Late payments for mobile phones, electricity, and gas services
- Court writs or judgements
There are still a number of other factors that take into account your risk as a borrower. For more details, contact your finance broker about it.
How can you check your credit score for free?
You can access your credit file for free once a year by contacting one of the following Credit Reporting Bodies (CRBs):
How to improve your credit score?
You can improve your credit score by looking at your current financial situation. As your financial circumstances improve your credit rating will also improve. Some ways include:
- lowering your credit card limits
- consolidating multiple personal loans and/or credit cards
- limiting your credit enquiries
- making your repayments on time
- paying your rent and bills on time
- paying your mortgage and other loans on time
- paying your credit card off in full each month
Having trouble securing a loan? We have access to lenders that don’t use an automated credit scoring system for your credit application. Instead, they look at your specific circumstances to get to the root of your credit history and your financial position. Got more questions? Give us a call today 0408 081 082, or shoot us a message on Facebook.
Credit Representative (486927) is authorised under Australian Credit Licence 389328.
This article provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances and your full financial situation will need to be reviewed prior to acceptance of any offer or product. It does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances. Subject to lenders terms and conditions, fees and charges and eligibility criteria apply.