Are you aware what your credit score is? If not, then you might want to read up as understanding your credit rating can be very useful when you apply for a loan or credit card.
What is a Credit Score?
A credit score or “credit rating” is the numerical score which shows how trustworthy someone’s reputation is in terms of borrowing money. Basically, this credit score sums up every detail of your credit report in a single number. This is what is used for example when you apply for a personal loan with Yes Loans.
The higher this number is, the more likely financial institutions will find you to be worthy of their lending services. When getting your credit rating through agencies such as Experian or Equifax, you will be given a number ranging from 0 to 1,200. This number is the summary of your credit report during that time. Higher scores are generally favourable while lower scores aren’t.
Your credit score is important since it directly affects the amount of credit financial agencies would be willing to lend, including the interest rate and other terms they have to offer. Essentially, they find out what your credit rating is first to know if it’s worth the risk to lend you their money.
What Credit Score Should I Aim For?
As mentioned earlier, the higher, the better since this rating influences the loan and credit card deals you can get.
- Excellent: 833 to 1,200
- Very Good: 726 to 832
- Good: 622 to 725
- Average: 510 to 621
- Below Average: 0 to 509
What’s Good and Bad for My Credit Rating?
It’s quite lengthy to list down all of the things that can affect your credit report. To give you an idea, here’s a summary of some of the things that can benefit or hurt your credit score:
😄 Good
- Punctual payment of bills
- Paying any outstanding debt from loans and credit cards
- Not getting any new loans or credit cards
- Has a constantly low balance on credit card
- Making monthly repayment on time each month
- Possessing “good” credit accounts where you’ve made repayments on time for several years
- Have available credit limit that is higher than one’s normal credit balance
😔 Not So Good
- Applying too often for loans or credit cards
- Making late repayments on loan or credit card debt
- Being rejected when applying for a loan or credit card
- Having payments or bills of at least $150 that are overdue
- Getting several balance transfer credit cards one after the other
- Obtaining balance transfer credit cards and then not repaying the balance transfer at the end of the promotional interest period
There’s also a myth that checking your credit score regularly can negatively impact your rating. This is simply not true. Your credit rating won’t go down as checking your credit history is a completely harmless exercise, and you may even do this for free at least once a year.
How Can I Check My Credit Score and Credit Report?
It’s free and very easy to check on your credit score today. You can use the national credit reporting bodies (CRBs) that are listed on the government website. These are:
- Credit Simple
- Equifax Australia
- Experian
- Get Credit Score
You will be required to supply your identification information in order to get your credit score. Doing so is very easy, and you can get the results on your credit rating right away. You can give yourself a quick check on the amount you will be thinking of borrowing by using our online loan calculator to get an idea on the numbers.
The credit reporting agencies listed lets you check your entire credit history. You can order a free copy of this report each year.
You can obtain the credit report by having been formally identified first. These agencies may ask you to provide your name, address, date of birth, previous address and/or driver’s license. The free credit report will be sent to you within 10 days upon request, but you can get it sooner if you can pay for it.
Why Do I Need to Check My Credit Score?
Knowing your credit score is important for you because it directly affects how much a lender will give to you as a borrower. People that have low credit scores are often viewed by reputable lenders as a big risk and may not pay back the money they owe. Besides that, a bad score can result in one being charged with extra interest rates or even rejected when applying for a loan.
With a good credit rating, however, you can show your lender that you have the capability to meet your financial obligations and repay the loan in full. Knowing that you have a good rating can give you an indication that you can proceed with your plans moving forward.
When is a Good Time to Check My Credit Score?
Apart from being able to get a free credit report each year, you can also order several more as long as you are willing to pay for them. Ideally, you should take a look at your credit report:
- Once every year
- Before you apply for a loan such as a personal loan or home loan
- If you believe that your personal details have been stolen either digitally or physically
What Can I Expect from a Credit Report?
Apart from your present personal information, the credit report you will be requesting is going to include details regarding your history of applying and getting loans and credit cards. This will also show your other types of credits, the record you have with regards to repaying these credit accounts, your maximum credit limits and more.
As Australia has already moved to a Comprehensive Credit Reporting (CCR) system, the credit history you have will now indicate more general data regarding the financial accounts you have at this time. You can also expect it to display the accounts you have opened and closed as well as how well you have met your repayments.
How Can I Check and Correct Wrong Listings?
Upon receiving your credit report, you should immediately check and see that all loans listed here are made by you with your name and date of birth included.
If you spot a mistake in the report, you can request to have it changed or you can ask to have your comments inserted in the report. Updating your credit report in order to remove incorrect listings is free, but it can only be modified if a listing is indeed inaccurate.
Below are some of the common mistakes to look out for in a credit report and how you can get it changed.
Mistakes Made by the Credit Reporting Agency
Your credit reporting agency may have reported incorrect information, such as:
- Wrong name or date of birth or the address of the user might need to be updated
- A debt has been listed twice, or the amount shown is wrong
You can have this error fixed by contacting your credit reporting agency where you obtained the report from. They can make adjustments to minor errors immediately or help you change it.
Mistakes Made by the Creditor
Your creditor might have wrongly or inaccurately reported your credit details. Some examples include:
- You might have been listed incorrectly as being in credit default
- Your creditor has failed to inform you regarding your outstanding debt
- A default listing was created while a debt was being disputed
- An account was made as a result of error or fraud by a third party
To fix this type of problem, simply do the following steps:
- If you believe you have been listed wrongly for credit default, you can contact your creditor and ask them to have it removed. If the creditor agrees that they are in the wrong, they will ask the credit reporting agency to remove such listing from your report.
- If you are not happy with the response from your creditor, you can contact the relevant Ombudsman service to get help.
- It may be possible to place a ban on your account without cost to make sure that only credit providers can access it.
Make sure that you stay on top of your credit health by checking your report at least once a year. Issues such as wrong listings don’t only affect your ability to get credit, but it can also give you hints on bigger problems such as identity theft. We have some very experienced finance brokers here at Yes Loans who will be able to help guide you if you have any questions.