With Comprehensive Credit Reporting (CCR) being introduced in Australia, knowing how to check your credit score and what can impact it, is more important than ever before.
If you’ve ever signed up to a phone contract or applied for finance, you’ve probably heard of your credit score. But what exactly is it, how is it calculated and what can impact it?
Your credit score is a unique number linked to your name that lenders use to determine how risky you are as a borrower.
It’s calculated based on your credit report, which contains a full summary of your financial history. This means your credit score is a pretty accurate reflection of how well you manage your money.
How your score works
Your credit score ranges between 1 and 1,000 or 1 and 1,200 depending on the bureau you choose to access it through.
An excellent score falls between 833 and 1,200, and a good score sits between 622 and 725. Currently it’s understood that a large proportion of Aussies generally sit at the high end of the “good” credit score bracket.
Anything below 600 is considered a “poor” credit score. If your credit score isn’t up to scratch, you may have a harder time applying for finance or services, as they may see you as more of a risk to lend to.
Factors that can impact your credit score
- Your spending history
- The types of credit you’ve applied for
- The number of credit applications lodged
- Defaulting on repayments
Where you can locate your score
Despite what many people think, accessing your credit report is easy. Finder offers a free credit report, powered by Experian, that you can use to check your credit score in a few minutes.
How to improve your credit score
Fortunately, credit scores are never permanent and can be improved over time with a few simple tweaks to the way you manage your money.
Below are some things you can do to bump up your score:
Limit your credit applications
Applying for multiple lines of credit over a short period of time will drag your score down. If you’re rejected by one lender, you’re much better off waiting a while before reapplying elsewhere.
Pay your bills on time
A late payment will become a default if it’s outstanding for six weeks or more, and this can linger on your credit report for up to five years. Speak to your provider about a payment plan if you’re having difficulty meeting repayments.
Lower your credit limits
If you have existing credit cards, lowering your limits can help improve your score. For instance, if you have a $5,000 limit but never come close to reaching it, ask your lender to lower it to $1,000 or $2,000 instead.
Double-check your credit report
You don’t want your score to be dragged down by something as simple as a system error. Make sure to check your credit report every couple of months to make sure all listings are correct.
Regardless of your credit score, it’s important to maintain good financial habits over time if you want to get ahead. Checking up on your score every few months can be a good way to ensure you’re on the right track.
Written by Bessie Hassan – a money expert at Finder