What is a credit score?

What is a credit score?


In Australia, there isn’t one unique, fixed credit score that’s available to consumers or credit providers. That’s because your credit score can change over time, depending on how often your credit report is updated. Credit scores may also be impacted by the way you repay your Credit Card, personal loan or mortgage and how often you apply for new lending products.


Credit reports are held by credit reporting bodies and show your credit-related activities over a 5 year period. Credit reporting bodies collect and share information with credit providers in accordance with the Privacy Act. Credit reports also show 24 months of repayment history information. When you apply for credit, like a Credit Card, loan, or overdraft, lenders may access your credit to help them decide if they’re able to lend to you responsibly.


Essentially, a good credit history will impact your credit score in a positive way and help to show that you’re a reliable borrower. On the other hand, missed repayments and defaults listings are usually seen as indicators of poor credit management, and will have a negative impact on your credit score.

How is a credit score calculated?


Your credit report is a history of your credit activity dating back five years. For example, your repayment history information shows if you missed a loan repayment, or you paid off your Credit Card balance in full every month over a 24 month period. Your credit report also shows where you applied for credit, and any payments you defaulted on in the last five years. Both the positive and negative actions are assessed to determine your credit score. However, once the activity becomes more than five years old, it’s deleted from your credit file, meaning it can’t impact your credit score.

What is a ‘good’ credit score?


Australia’s three main credit reporting bodies are Equifax, illion and Experian. Each has a slightly different way of calculating credit scores using the data they hold on credit files. Your credit score will change over time as your credit behaviour changes.

How to check your credit score


You can check your credit score free of charge directly with the credit reporting bodies Equifax, illion and Experian. Each body creates their own scores using comprehensive credit information provided to them by lenders. They also use information taken from the public record, such as court judgments and bankruptcies.

What affects your credit score?


Your credit score changes over time for a number reasons. Along with your credit history and repayment information, the number of credit enquiries on your credit report are also considered. And if you fail to make repayments, that also gets recorded on your credit report. That’s why it’s important to pick the right Card for your personal spending habits.

How to improve your credit score?


The good news is that your credit score changes, so it’s possible to improve on a bad score over time. Here are a few things you can do to manage your credit report and credit score:


  • Limit how often you make new applications for credit wherever possible.
    Make sure the product you’re applying for suits your needs. Only borrow what you need and can afford to repay.

  • Always make credit repayments and pay bills on time.
    Setting up direct debts for your bills and repayments or using BPAY helps make sure payments are made on time. You should also create a monthly budget of your income and outgoings, so you know exactly what you can and can’t afford.

  • Consider lowering your existing credit limits on any Cards you already have.
    The lower your credit limit, the easier it’ll be to keep the balance down and pay it off quickly.

  • Check your credit report regularly and make sure all the information is correct.
    You shouldn’t just assume credit reporting bodies have the right information. If you see anything in your report that doesn’t seem right, you can ask for it to be investigated and corrected. Keeping an eye on your credit report can also help you identify fraudulent activity or repayments that haven’t been recorded.

Want to learn more about Credit Reports and Credit Scores?


Visit www.creditsmart.org.au or www.moneysmart.gov.au.

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