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Why You Need to Know Your Credit Score and How to Find Out What It Is

Jul 1, 2022 | Finance Tips

Did you know that applying for a phone plan actually relies on your credit score? Yes, that’s right, credit scores aren’t only just relevant when you’re looking at applying for car loans, personal loans or home loans. Knowing your credit score and what it means for you can be a real power move — not just now but for future finance decisions too.
If you want to understand more about credit scores and how to check yours, then keep reading as we guide you through the basics of credit reporting!

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At Finance One, we assess all applications on their own merits, so we can be very flexible and even help Aussies with bad credit get the right loan for their situation.

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What are credit scores?

A credit score, or credit rating as it’s often known, is a score or rating set by credit reporting bodies, based on your history of borrowing and repaying money. When you apply for a credit product, such as a buy-now-pay-later scheme, personal loan, home loan, car loan, credit card or post-paid mobile phone plan, your details are run through a credit check, so that the credit provider can assess how responsible you are with your money and whether they’re willing to lend to you. They are able to do this by reviewing your credit report, which is essentially a summary of all of the credit information from your credit file.

Your credit reputation lets credit providers with an Australian Credit Licence gauge if they are willing to approve your application or not. Usually, the higher your rating or credit score, the more chance you have of being approved. Not only that, but sometimes those with a sound credit history will be offered a more attractive interest rate or a better deal, than those with a poorer credit history.

Before you apply for any credit product, it pays to understand your credit health and how credit scores work, because flippantly applying without first doing your homework could mean being refused! By the same token, understanding what impacts you credit score and working to have a strong credit file can potentially mean negotiating with lenders for better deals.

What’s a good credit score?

Depending on the credit reporting agency, you will have a credit score anywhere from 0-1,000 or 0-1200. The higher the score, the higher your rating is! Generally speaking, the higher the better.

How your credit score is determined

You may be wondering ‘well how is a credit score calculated’? This is the complicated bit; your credit score is calculated based on a range of different factors. It is influenced by:
  • Your debt, both past and present. If you have overdue debt, then this may be registered on your file as a ‘default’.
  • Your repayment history on any personal loan, other loan or credit card that you have, or have had.
  • Any store cards, including buy-now-pay-later schemes.
  • The credit limit you currently have.
  • Any credit accounts that you’ve opened or closed.
  • The number of times you undergo a credit application in a given period. (Note that too many applications at one time can have an unfavourable effect on your credit score).
  • Whether or not you hold any court judgments in relation to outstanding debt or if you’ve ever entered into a debt agreement.
  • It might go without saying that having previously been bankrupt, or currently in bankruptcy will seriously affect your credit score.

Your score is also boosted up when you have positive information on your credit file, such as:

  • When you completely repay a debt, and it’s listed as a ‘closed account’.
  • Having some open credit accounts that are showing as paid as agreed.

What is on my credit report?

When you apply to borrow funds, the lender will access a copy of your credit report through one of the credit reporting agencies in Australia. It’s your credit report that helps assist lenders in assessing your application.
As you might expect, your credit report contains credit related personal information such as what we described above; financial information such as your current and past debt, repayment history, past borrowing applications (regardless of whether they were approved or declined) and of course any history of insolvency (such as court judgments, debt agreements or bankruptcy). Any open accounts, such as those held with credit card companies or other lenders will also appear.

Did you know

The financial information on your credit report can stay on your credit report for up to seven to ten years? For example, on an Equifax credit report, defaults stay on your credit report for seven years, and bankruptcy can stay on your Equifax Credit Report for up to ten years!

Where can I do a credit rating check?

To check your credit score, you have to access your information through a credit reporting company. The Australian government sets out that a credit reporting body must provide you with free access to get your credit report once every three months.

There are other occasions when credit reports can be accessed for free, such as if you’ve been denied credit within the last 90 days or had some credit-related information fixed up.

Remember that free credit reports won’t necessarily tell you if you’re going to be approved or declined for a loan, as each lender will have its own set of criteria. Access your free credit report here.

Can I repair my credit file?

If you’ve checked, and your score isn’t where you want it to be, you could be curious if you can ‘repair’ your credit file or not. Maybe your friends have told you that a ‘credit repair’ company has ‘fixed’ their credit file — be warned, companies that claim they can ‘repair’, ‘fix’, or ‘wash’ a blemished credit history often only have the legal power to do as much as you can, and they often charge handsomely for it.

There are some things that you can do yourself to make sure that your file doesn’t contain any errors that could be negatively affecting your score, such as check for wrongly listed defaults, make sure that your personal details are up to date and that every enquiry on your file is definitely yours. If a criminal obtains enough personal information about you, they may try to access your available credit by stealing your identity.
Identity theft is a serious crime, and one that can cripple someone’s ability to get a loan or access credit for years. Keeping your details up to date and making sure that there’s no suspicious credit applications on your credit file can help protect your file.

If you feel that your debt has become too heavy to handle, you can contact a Financial Counsellor for free at the National Debt Helpline, who can provide some tools, guidance and advice.

What are my options to apply to borrow money if I have a blemished credit report?

If you need to apply to borrow money, but have a less than glowing credit report, you’ll want to speak with a lender that takes a personal approach in looking at your financial situation.

We are Here to Help:

Talk to Finance One today, we are one of Australia’s specialised lenders when it comes to providing loans for Aussies with bad credit.

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Disclaimer: The information above is of a general nature only and does not consider your personal objectives, financial situation or particular needs. You should consider seeking independent advice regarding your legal, financial, taxation or other needs, to check how the information relates to your particular circumstances. We do not accept responsibility for any loss arising from the use of, or reliance on, the information. All loan applications are subject to normal lending criteria. Fees and charges payable. Terms and conditions apply.

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Makala Elliott

Makala is the Marketing Manager at Finance One. She has worked in the Finance and Lending industry for over 10 years, gathering a wealth of experience. She is passionate about helping Australians get back on track with their finances by passing on her knowledge.

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