What’s your credit score?
It’s a question that every adult should be able to answer. Those digits will determine how easy it is to acquire a personal loan, mortgage, and credit card, as well as what kind of rates you’re offered.
If you’re not sure, don’t worry, as you’re not alone.
In the following guide, we’ll take a closer look at credit scores in Australia, showing you how they work and answering questions such as:
Your credit score is a number between 0 and 1,000 (1,200 for Equifax). It is calculated automatically and updated when new information is received.
The higher your score is, the easier it will be for you to acquire credit.
All the following factors contribute to your credit score:
Your payment history is the most important part of your score. It covers all your previous repayments, missed payments, and defaults. It tells lenders how responsible you are and how likely you are to meet your obligations.
Lenders don’t really care about the total amount that you have borrowed. It’s all relative—what’s astronomical to one borrower could be infinitesimal to another. Instead, they focus on utilisation, which is the total credit available vs the total credit used.
So, if you have $5,000 worth of credit card debt but your total credit limit is over $50,000, you should be okay. Conversely, if your limit is just $500 and your debt is the same, your credit utilisation will be high.
You need some accounts to build a strong credit score, but if you have too many, it could work against you.
It should go without saying that meeting your first monthly credit card payment is not the same as making that payment every month for 10 years. You’re 100% in both cases, but duration matters.
A new credit application can reduce your credit score, and opening many new accounts at once could leave a sizeable mark.
You have more than one credit score, as your information is compiled and rated by more than one agency.
The information these agencies use to build their scores also varies, but not by much.
They all consider new accounts, missed payments, defaults, and credit utilisation, and if your score is terrible with one agency, it’s unlikely to be excellent with another (unless the first agency has made a mistake).
However, there can be some notable variations.
|Credit Score Range||Equifax (0 to 1200)||Experian (0 to 1000)||Illion (0 to 1000)|
|Excellent||833 to 1200||800 to 1000||800 to 1000|
|Very Good||726 to 832||700 to 799||700 to 799|
|Average||622 to 725||625 to 699||500 to 699|
|Fair||510 to 621||550 to 624||300 to 499|
|Low||0 to 509||0 to 549||0 to 299|
If you’re checking your credit score for the first time in years, it can be a daunting experience.
It’s like an ominously entitled email from your boss—you need to look, but you just can’t summon up the courage.
But a low credit score is not the end of the world, so take the plunge, check your score, and then take the necessary steps if it’s low.
The three major credit reporting agencies offer paid options where you can view your credit report/score and receive some other benefits (security alerts, notifications about changes, dark web scanning). By law, they are also required to grant access to your credit score once every 3 months.
You can request a free credit report using the links below:
We recommend checking all three of them for free to begin with. If you like any of the services provided and want to monitor your report closely, you can then consider the premium options.
Your credit score is not set in stone. There are steps you can take to improve it, including:
Most of these tips take time and patience. Credit scores also update slowly, so you won’t necessarily see the results of your hard work in real-time.
But if you’re patient, you’ll reap the rewards in time.
A low credit score isn’t the end of the world. Ume Loans was founded on the notion that bad things happen to good people and everyone deserves a second chance. So, if you find yourself with bad credit resulting from a missed payment, default, or another mistake, you can still get a bad credit loan with us.
However, a higher credit score will certainly make your life easier when it comes to making those big financial decisions.
So, check your score, keep these determining factors in mind, and do what you can to fix it. You might not see an immediate overnight improvement, but you’ll get there eventually.
Dan, a former Australian jetski champion is passionate about helping various organisations and has held various volunteer and executive positions with several non profit organisations in Australia.