Making Sense of Your Credit Score & Credit Report
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Making Sense of Your Credit Score & Credit Report



26/03/2021 • 11 minute read

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Want to get to know your credit score?

Your credit score is a number that lenders and credit providers use to help assess your creditworthiness and reliability as a borrower. It’s one of the most important numbers in your life. So why is it that the term brings shivers down people’s spines when they hear it? Recent research found that almost 2 thirds of Aussies don’t know their credit score, with 1 in 7 people being too scared to check it. Oiyo is here to change that. People shouldn’t be afraid to check their credit score. In fact, what should worry people is not knowing their score at all!

Our friends over at Tippla have worked with us to put together a comprehensive guide on credit scores. If you want to know how to check your score, what affects your credit score or ways of improving it, this article has all the details you need to read!

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Key takeaways:

  • Credit scores are ranked from 0 to 1200 (depending on the institution).
  • Your credit score often plays a big role in your ability to get approved for finance.
  • You can work to improve your score effectively managing your debt and keeping track of your credit file.

What is a credit score?

Your credit score is a numerical representation of the information in your credit report. Lenders and credit providers use your credit score to assess your reliability as a borrower. Therefore it can affect your chances of approval when applying for a credit card, personal loan, car loan, home loan etc.

What does my credit score mean?

Generally, your credit score will range between 0 and 1200 (based on Equifax’s reporting scale), however, this can differ between different credit reporting bureau’s. So if you’ve been Googling ‘what is a good credit score’, the table below should give you a good idea on where you stand.

833 – 1200It is highly unlikely that something could harm your credit report in the next twelve months.
726 – 832It is unlikely that something could harm your credit report in the next twelve months.
622 – 725It is less likely that something could harm your credit report in the next twelve months.
510 – 621It is likely that something could harm your credit report in the next twelve months.
0 – 509It is more likely that something could harm your credit report in the next twelve months.

Why do I have more than one credit score?

It might surprise you to know that you actually have more than one credit score – you have three! In Australia, there are three credit reporting agencies – Equifax, Experian and CheckYourCredit (illion).

Each of these reporting agencies has different reporting algorithms and they have access to different streams of information. Because of this, it is highly likely that you will have a different credit score for each of these credit reporting agencies. Sometimes, there can be a big difference, and other times, the change in ratings from each agency is minimal.

Credit report vs credit score

Your credit score is based on your credit report, they are not the same thing! A credit score is a 4-digit number that indicates your creditworthiness. It is calculated by looking at your credit report that contains detailed information about previous and current credit accounts, your repayment history and any so-called adverse events (negative entries) that are listed on your credit report.

If you speak about your credit score, you are referring to your number. Your credit report, on the other hand, contains more information and some credit providers calculate your creditworthiness based on other factors in there.

How are credit scores calculated?

There are several factors that contribute to calculating your credit score. These are important to know if you’re looking to either rehabilitate or maintain your score.

Credit enquiries

When you apply for credit or a loan, a credit enquiry is created on your credit report. Several credit enquiries on your report will cause your score to drop. So if you’re applying for multiple loans hoping one will get approved, you’re actually damaging your credit score in the process.

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Before applying for a loan, do your research and contact different lenders. You want to find a lender that is most likely to approve your application.

Repayment history

Your repayment history and reliability at paying your bills on time will have a resounding effect on your credit score. Any overdue debt that’s at least $150 will be listed on your credit report when it’s 60-days or more overdue. Your repayment history is also a good indicator of future performance. If a lender sees that you are inconsistent with repaying your loans on time, they may see you as a risky borrower.

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Pay your bills on or before the due date. Set reminders so that you don’t forget. If you aren’t able to pay on the due date, ensure that you pay off the debt within 60-days of getting the first notice of payment so that it doesn’t appear on your credit report.

Level of debt

As contradictory as it sounds – debt isn’t necessarily negative for your credit score. Your credit score is a numeric display of how well you can manage debt. Well-managed debt indicates to future credit providers that you are able to manage multiple debts at once while sticking to your repayment dates.

Your level of debt is expressed as your credit utilisation ratio in your credit report. This ratio is a large contributor to your credit score calculations. It’s essentially the amount of revolving credit you’re currently using divided by the total amount of revolving credit you have available to you. In other words, it’s calculated by dividing your credit card balance by your credit limit. The less credit you have used the better your ratio will be.

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Generally, a good credit utilisation ratio is less than 30%. Therefore if your credit limit is $2000 every month, you shouldn’t spend more than $600 on that card during the month.

Age of your available credit

The age of the credit balances that you have available to you are also contributing factors when it comes to your credit score. If you can illustrate that you can successfully manage a line of credit or loan for a long period of time and keep up to date on your repayments, this will be positively reflected in your credit score. It effectively offers insight into how experienced you are at handling debt and your finances. It also indicates that you are a good candidate for borrowing as it illustrates reliability.

Why is my credit score important?

Your credit score is important as it illustrates to a prospective lender how responsible and capable you are with money and can be a strong indicator of whether or not to lend further funds to you. When lenders lend money to borrowers they are taking on a certain level of risk. A credit score helps lenders to evaluate this risk before offering the borrower money.

This can make the transaction less risky overall for both the lender and borrower as the lender has a financial history to refer to that illustrates that the borrower has the capacity to repay the debt successfully. Conducting a credit check is not the only aspect lenders use when assessing a loan application. However, it is important and could also impact the interest rate that lenders offer you.

Why Is My Credit Score Important

Comprehensive credit reporting

Comprehensive credit reporting is a system of reporting on all your financial activity including your good activity, not just when you miss a repayment or default to a lender. Lenders that you have accounts with will report your credit activity which helps to provide a more accurate depiction of your credit profile with them. This is great as it illustrates your good history which can positively affect your credit score. Previously, only bad credit history tended to make it onto a file, so this is a great system that gives a better snapshot of your relationship with money.

How can I check my credit score online?

To check your credit score and credit report you have a few options. For starters, there are three main credit reporting agencies that you can visit to check your credit score:

You can request a free credit report from any of these organisations that will typically be provided to you within 10-business days. Simply select ‘check my credit score’ or ‘get free credit score’ to get a copy of your report.

Alternatively, you can utilise other third-party platforms to check and monitor your credit score – like Tippla! Tippla enables you to view your credit score from not one, but two reporting agencies at once: Equifax and Experian. We also provide a number of insights and tools to help you improve your score so that you can work towards achieving all your financial goals.

Ways to improve a credit score

If you’ve had a bit of trouble with repaying your debts in the past and your credit score has suffered a little bit, it’s okay! Many lenders understand that these things happen and the best way to move forward is to start thinking about how to improve your score. If you’re not too sure what your credit score is, your first step is to undertake a credit score check and figure out where you’re sitting. Your credit file will detail what your debts are and you can use this to start working on improving your score. There are multiple ways you can begin to improve your score:

1. Get back on track with your repayments

If you’re behind on repayments with any of your lenders, this can have a negative effect on your credit score. The best way to start improving your score is to get back on track with your repayments and maintain a good repayment history. Your credit file will detail your repayment history for the last 2-years, so the sooner you can get back on track with any repayments you may be behind on, the better.

2. Keep track of your credit enquiries

A credit enquiry is created on your credit report whenever you apply for credit or a loan. The amount of enquiries you make on your file is incredibly important. If you’ve been applying for multiple loans with different lenders, your credit score will most likely have been damaged because of this. So, when you’re in need of a loan, do your research and shop around for a lender that is more likely to approve you.

It’s important to note that credit enquiries stay on your report for 2 years, regardless of whether you’re approved for a loan or decide to go forward with the loan.

3. Remove any inaccuracies from your credit file

It’s important to check your credit score at least every 12-months to ensure you don’t have any inaccuracies. If you do, you need to dispute this immediately. Inaccuracies or fraudulent accounts on your report could be having a negative impact on your credit score.

Mistakes happen more often than you may think! 1 out of 5 credit scores contain at least one mistake that can cause your number to drop. It’s important to check your information thoroughly and frequently.

4. Pay off any defaults

Having a default on your credit file is not a good sign to lenders as it shows that you have failed to pay off an existing credit contract with a previous lender/credit provider. This can indicate that you’re more of a risk to lend to and many lenders may be hesitant to offer you further funds. If you have the capacity to do so, paying off this default is a great way to start improving your credit score. If you’re able to pay the default off it will still show as a default on your credit file, but it will also indicate that it has been paid, which many lenders will look upon favourably.

A default stays on your credit file for 5-years, so the sooner you can start working on paying off that default and improving your score, the better, as it’s there for a significant period of time.

Why you should check your credit score

Keeping up-to-date and maintaining a healthy credit score is incredibly important. There is no frequency in which your credit report is updated. However, new information is being added consistently, so your score is always subject to change. It’s always a good idea to stay up to date with these changes, especially if you’re planning to apply for credit or a loan in the near future.

Being aware of what is going on in your credit report shows that you’re aware of your finances and are responsible when it comes to handling your debts and repayments. Regularly checking your credit score to make sure it’s correct can save you a lot of time and hassle down the road when you may plan to apply for a loan.

Why You Should Check Your Credit Score

Making sense of your credit score

When it comes to your credit score and your credit report, making sense of what it is and how it works is incredibly important. Knowing what can affect it and working to keep it healthy can be a saving grace especially when it comes to applying for a loan.

Do yourself a favour and head over to one of the credit reporting bureau’s and select ‘Get Credit Score’ or ‘Check Credit Score Australia’ to see where you stand.

Looking to do more with your finances?

At Oiyo, we think it’s time to change the way we talk about money. We’re not financial advisors but we can offer helpful insights and comprehensive guides on all things finance and insurance.

If you found this guide helpful, we’ve got plenty more where that came from! Our aim is to make it easy for Aussies to access the insightful and to-the-point guides.

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Written by Tippla

Tippla is an online platform that enables you to compare your credit scores from 2 of Australia's 3 biggest credit reporting agencies and get insights on how to improve your ranking. We've worked with the Tippla team to produce a comprehensive guide on credit scores. How do they work? Why should you care? We've covered everything you need to know!

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