August 2021 – Tippla Credit School

August 31, 2021

What Goes on My Credit Report & For How Long?

Want to know what goes on your credit report, and how long that information remains on your credit file? Then Tippla has the perfect guide for you.

Your credit report is an important document and it can have far-reaching implications. Any time you apply for a loan, credit card, mortgage, utilities, even a phone plan – your credit report plays an important role. That’s why we’re going to answer the question “what goes on my credit report”, as well as delve into how long information remains on your file.

What is a credit report?

A credit report is a document that outlines your recent credit history. Your credit history is an account of your credit activity. As outlined by Experian, credit is the ability to borrow money or utilise goods or services, with the understanding that you will repay the credit at a later date.

So your credit history is an account of any time you have used credit – whether it be a loan, credit card, utilities, phone plan and more. Your recent credit history appears on your credit report.

In Australia, you have three credit reports from the three credit bureaus in Australia – Equifax, Experian and illion. The information listed on your credit report is what’s used to calculate your credit score. Your credit score is a number ranging from 0 – 1,200 and provides an indication of your creditworthiness.

Why does my credit report matter?

Whenever you apply for credit (with limited exceptions), the company you are applying for credit with, will check your credit report. They do this to see how risky of a borrower you are.

Lenders will check the information on your credit report to look out for any red flags – do you have defaults on your report? Have you recently made a lot of credit applications recently which might indicate that you’re in financial difficulty? Or do you have a stellar credit report and a good credit score? These are some of the things credit providers will look out for when making their decision.

Whilst your credit report and credit score aren’t the only factors companies will consider when deciding whether to lend to you, it is an important piece of the application process. That’s why it’s a good idea to employ good credit behaviour to maximise the likelihood of being approved for a loan.

What goes on my credit report?

There is a lot of information that goes onto your credit report, but we’re here to break it down for you. Below is an outline of the information that can be stored on your credit report, if it’s applicable.

Credit enquiries

When you apply for a loan, credit card, or even utilities, this is known as a credit application or credit enquiry. As part of your application, typically in the terms and conditions, you are giving the company you’re applying with permission to check your credit score and credit report. When they check your credit report, this is referred to as a hard enquiry.

Each time you apply for some type of credit, and the resulting hard enquiry is made, it will appear on your credit report. This will occur regardless of whether you are accepted or rejected for the credit you apply for.

There are two types of enquiries – a hard enquiry or a soft enquiry. The main difference is that a hard enquiry is made after you have applied for money, whereas a soft enquiry is unrelated to lending you money.

Specifically, a hard enquiry is when a lender checks your credit report following a credit application. Hard enquiries harm your credit score and remain on your credit report for up to five years.

Soft enquiries, however, do not harm your credit score. Soft enquiries are when someone runs a credit check on you, but it’s unrelated to money. This could be a pre-approved credit offer, or platforms like Tippla, that allow you access to your credit report for free.

Credit enquiries appear on your credit report because it gives lenders insight into your financial situation. If you have lots of enquiries on your credit report, it could symbolise that you are in financial difficulty and are likely to default on your repayments.

Few, or even no credit enquiries, could suggest that you are responsible with your finances. Whilst both of these scenarios might be false, or not paint the whole picture, this is what credit enquiries on your report may suggest.

According to Equifax, when it comes to credit enquiries, they will provide the following information on your credit report:

Type of credit provider;
The type and size of credit requested in the application;
The pattern of credit enquiries over time.

Credit accounts

Similar to credit enquiries, and credit accounts that you currently have open will appear on your credit file. Are you currently repaying a loan? Do you have an active credit card? Then this will appear on your credit report.

Repayment history

Your repayment history is an important part of your credit report. Your repayment history is information that outlined whether you have met your credit payment obligations in a given month. Basically, your repayment history shows whether you paid the amount owing on your loan, credit card, etc by the due date.

Defaults

Similar to repayment history, defaults will also appear on your credit report. A default is a missed payment. According to the Office of the Australian Information Commissioner (OAIC), a credit provider can list a default on your credit report if:

the payment has been overdue for at least 60 days;
the overdue payment is equal to or more than $150;
a notice has been sent to your last known address to let you know about the overdue payment and requesting payment;
a second notice was sent at least 30 days later to let you know that if you don’t make a payment the credit provider intends to disclose the information to a credit reporting body;
the credit provider must wait at least 14 days after issuing the second notice before listing the default.

Other negative entries

Your credit report can also contain other negative entries, if applicable. This can include bankruptcies, court writs or judgements.

Personal information

Not only does your credit report contain your credit history, but it also contains some of your personal information about your identity. This includes your name, address and date of birth. It won’t, however, include information such as your marital status or salary.

How long does information remain on my credit report?

Now you know what goes onto your credit report, let’s take a look into how long items stay on your credit report. As we highlighted at the beginning of this article, your credit report is an overview of your recent credit history.

It won’t contain all the credit information you’ve accrued over the past 10 years. Items do expire after a time. This is particularly beneficial if you have a poor credit history – you can work to improve it, and it won’t always be a black mark on your credit report.

Here’s typically how long items remain on your credit report:

Credit accounts – your credit report will outline all of your current credit accounts, as well as any that you have closed in the past 2 years;
Credit applications – any application you have made for some type of credit will remain on your report for 5 years regardless of whether you were approved or rejected;
Repayment history – your repayment history over the past 2 years;
Defaults – if you default on a repayment then it will appear on your report for up to 5 years;
Court judgements and bankruptcies – 5 years;
Serious credit infringements – these can stay on your credit report for up to 7 years.

Can I get information removed from my credit report?

If you notice a mistake on your credit report, then you can take steps to have it removed from your credit report. You can either reach out to the relevant credit provider, or you can reach out to the credit bureau themselves and ask them to handle the mistake.

However, if the information on your credit report is correct, regardless of whether the information is negative and harms your credit score, it can’t be removed. You will need to wait for the allotted time period for that information to expire from your credit report.

August 24, 2021

First Steps in Buying Your First Home | An Easy Guide

You’ve decided you want to get into the property market, but what are the first steps in buying your first home? Tippla has put together an easy guide to get you started.

Buying your first home is an exciting process. Buying a house is likely one of the biggest purchases you’ll ever make, and it can set up your future self for financial stability. As exciting as the process can be, there is also a lot to consider.

Before you even find the property you want to purchase, there are a few things you should do first. Tippla has put together the first steps you should take in buying your first home. But first, let’s take a look at the general situation of the Australian property market.

Australia’s property market for first home buyers

Despite the COVID-19 pandemic, so far this year, the housing market has remained largely resilient. According to the Australian Bureau of Statistics (ABS), $22.86 billion worth of new home loans were taken out during the month of June 2021 for owner-occupied homes. Whilst this was down by 2.5% from the previous month, it was higher by 75.9% from June 2020

For the same period, the number of new loan commitments for first home buyers was down 7.8% from the previous month but remained at an elevated level similar to that seen in November of 2020.

Specifically, during the month of June, 14,418 new home loans were taken out by first home buyers. The largest number of home loans was taken out in Victoria, followed by New South Wales and Queensland.

Now, let’s get into the first steps you should take when buying your first home.

Step 1: Do Your Research

When looking at buying your first property, it’s important to do your research and understand your motivation. Do you want a house to call home, do you want to use it as an investment property, or do you only plan to live in it short-term and then lease it out? For each of these situations, you’d likely be looking for a different kind of place.

Once you know why you’re buying your first home, then it’s a good idea to do your research and see what’s out there. Housing prices change all the time. Get an idea of what you want, what area you would like to buy in, and how much what you want will cost in that area.

Here are some of the top property websites where you can search for what’s on the market:

If you want to find out the average property prices per state in Australia, then you can check out the Australian Bureau of Statistics (ABS) latest figures. These are updated on a quarterly basis.

It’s a good idea to do your research on what’s available and get an idea of how much you are looking to spend if you want to buy in a specific area. You might find that what you want might be too expensive in the area you want to buy, so you might have to look in other areas.

Determine how much you can borrow

Unless you have enough money to buy a property outright, you will likely need to take on a mortgage from a financial institution to buy your first home. Before you take this step, it’s a good idea to know how much you will likely be able to borrow.

The amount you can borrow will depend on your income, expenses and however much money you have saved. Banks, lenders and financial education platforms such as Moneysmart have a borrowing calculator, which can give you an idea of how much you could borrow, and what your repayments might look like.

Knowing how much you will likely be able to borrow can help you refine your search, and it means you won’t waste time looking at properties that you probably won’t be able to afford.

Borrowing capacity explained

In Australia, the amount you can borrow for a home loan will depend on the individual lender and their appetite for risk. To calculate your borrowing capacity, lenders will typically use the household expenditure measure (HEM).

When you apply for a home loan, they will take a look at a range of factors to determine your current lifestyle and financial stability. Some of the factors they’ll look at include your age, income, employment, number of people making the application (eg. single individual vs a couple), number of dependants, spending habits, debts and more.

It is generally recommended that you borrow 80% of the value of the house you intend on purchasing. That means, you will need a 20% deposit for the house, and then take on a mortgage for the remaining 80%. This way, you can avoid paying Lenders Mortgage Insurance (LMI). If you are willing to pay LMI, then you can have a deposit of as little as 5%.

Understand the total cost of buying a house

When it comes to buying a house, there isn’t just one cost you need to consider. You will also need to factor in stamp duty, conveyancing and legal fees, house and pest inspection costs, as well as other costs associated with your home loan including mortgage registration fee, loan application fee and more.

According to realestate.com.au, if you want to buy a home in Queensland that’s valued at $500,000, you will likely end up paying between $10,000 – $20,000 extra in fees. Here’s a breakdown based on their data from 2020:

Property value: $500,000
Conveyancing and legal fees: $1800
Stamp duty: $0 for first-home buyers, $8750 for others
Building and pest inspection (combined): $600
Mortgage registration fee: $187
Transfer fee ($35 for every $10,000 over $180,000): $1120
Loan application fee: $500 – $600
Mortgage insurance: $8000
Council and utility rates: roughly $500 (per quarter)

Therefore, considering all of these extra fees, you could be paying between $512,707 – $521,557 altogether. That’s why knowing all of the costs associated with buying your first home can help you avoid any nasty surprises and budget effectively.

Look into government grants

If you are buying your first home, then you could be eligible for government grants. The main one is the First Home Owner Grant or the First Home Loan Deposit Scheme. For your first home, there is also a First Home Concession, where you can avoid paying the stamp duty for houses under $550,000.

Lenders Mortgage Insurance

Another thing you should look into is LMI. LMI is a premium that is added to your home loan if your deposit is below a certain level. Typically, if your deposit is less than 20% of the total cost of the property, then you will pay LMI.

The amount of LMI you will need to pay depends on how much of the deposit you have. If you only have a 5% deposit, then you will likely be paying a lot in LMI. But, if your deposit is 15%, then you likely won’t be paying a lot for LMI. Nonetheless, LMI is an extra cost and one you can avoid if you have a deposit of generally 20% or more.

LMI is calculated on a sliding scale, so the closer you get to a 20% deposit, the less LMI you will need to pay. For example, if you’re a first home buyer and you purchase a house for $500,000 and secure a mortgage with a 10% deposit, according to Westpac’s stamp duty LMI calculator, then you’ll be looking at paying about $13,830 in LMI. If you put down a deposit of 15%, then the LMI you will need to pay will be around $6,014.

Step 2: Start saving

Once you’ve done your research – you know what type of property you’re after, how much you can afford to borrow, and you’re aware of all the hidden costs, the next step is to start saving! It’s generally a good idea to have already saved some money before you start looking into getting a property because a deposit can be quite hefty. Although the amount will depend on what you want to buy.

So how can you save money? One of the most effective ways to consistently save money is to establish a budget.

Here are a few different types of budgets you could explore.

Step 3: Discover your home loan options

What comes next? You’re already saving and you’ve got a general idea of all of the costs involved – what’s the next step? One thing you could do is learn more about your home loan options.

Consider a mortgage broker

A mortgage broker is a person who acts as a go-between between yourself and banks and lenders to help you arrange a home loan. Mortgage brokers are required by law to act in your best interest when suggesting a loan for you.

Pros and cons of a mortgage broker

A good mortgage broker can be an invaluable resource. Not only can they help you understand all of the hidden costs when it comes to home loans, but they can also help guide you through the process of securing a mortgage.

A good mortgage broker should understand your needs and goals and help you work out what you can afford to borrow and find the financing options that suit your circumstances. They should also explain the characteristics of each loan, such as the interest rate, features and fees.

A mortgage broker will help you apply for the loan and then manage the process through to the settlement.

Mortgage brokers generally are paid via a fee or commission from lenders for selling their products. That means you as the consumer don’t have to pay a mortgage broker – but some mortgage brokers will charge a fee. Be sure to clarify whether your mortgage broker charges a fee before using their services.

Because mortgage brokers typically receive commissions from lenders and banks for recommending their products, this creates an obvious potential conflict of interest. That’s why it’s a good idea to also do your own research.

Compare home loans

Regardless of whether you decide to enlist the help of a mortgage broker, it’s a good idea to do your own research on home loans. When you take out a home loan, there can be many variables – the interest rate, loan features, and fees can vary among lenders.

Two important indicators you should look out for are the interest rate and comparison rate. The interest rate highlights how much interest you will be charged each year. You will need to repay the interest in addition to the amount you have borrowed.

The comparison rate, however, is a percentage that gives you a better picture of how much you will have to repay on top of the amount you borrowed. Specifically, the comparison rate includes the interest rate plus most of the fees and charges that come with the loan.

Moneysmart outlines that the following priorities when looking for a home loan:

Get the shortest loan term you can afford;
Aim for the lowest interest rate;
Warning – features costs extra.

Get pre-approval for buying your first home

Another part of the journey to buying your first home can include securing pre-approval from a lender. Loan pre-approval means that a lender has agreed in principle to lend you a certain amount of money to go towards buying your home. However, a pre-approval means it hasn’t yet progressed to full or final approval.

The benefits of pre-approval mean that you have a stronger idea of how much you can borrow, and therefore, what kind of property you can afford to buy. It can also allow you to negotiate with more certainty, and if you go to an auction, bid with more certainty.

In order to secure pre-approval, they will ask for evidence of your current financial situation. This could include your bank statements, credit score, income and employment information. Pre-approval lasts for 3-6 months, but it doesn’t mean you are committed to the loan, but it does show that you’re serious about buying.

Step 4: Start house hunting

Now, you are ready to start looking for your dream home, investment property, or your starter home – whatever it may be! This is probably the most exciting part of the journey – attending house inspections, seeing what’s out there, attending auctions.

Once you’ve got yourself set up and ready to go, now you can get serious and start the process of house hunting!

August 16, 2021September 7, 2021

What are the Different Types of Personal Loans?

Are you looking for a personal loan but you’re not sure which one is right for you? Tippla has put together this helpful guide on the different types of personal loans.

What is a personal loan?

A personal loan is an amount of money that you can borrow from a financial institution such as a bank, non-bank lender, credit union, etc. You can use this money to pay for a range of personal expenses, such as:

Medical expenses;
Weddings;
Vacations;
Funerals;
Large purchases, such as a television;
Emergency expenses;
Home renovations.

Typically, with a personal loan, you will borrow a set amount of money, and you will need to repay this amount in full, plus interest, over a set period of time. Some lenders may also charge fees for personal loans, which you will have to pay.

Why would you take on a personal loan?

Because you can use a personal loan to cover many different expenses, there are a number of reasons why you might take on a personal loan. This could be to cover an unexpected expense, make a large purchase, or help pay for an event – such as a wedding, funeral or vacation.

Basically, if you have a large expense, then you might want a personal loan to help pay for it.

Where can you apply for a personal loan?

Now you know the what and the why, let’s look at where you can apply for a personal loan in Australia.

Of course, banks are still one of the largest players in the game. But, you can also get personal loans from many non-bank lenders across the country. You can also apply with credit unions.

If you are looking for a personal loan, then Tippla has you covered! When you sign up for Tippla, you can access a range of personal loan offers that have been tailored to your credit score. When you fill out the application, you will be matched with a range of lenders who would be willing to lend to you based on your credit score.

Furthermore, there are many comparison websites that display a range of loans available if you want to look around for a loan. However, these sites might not show all of the options available on the market.

Am I eligible for a personal loan?

Whilst different banks, non-bank lenders and credit unions will have different lending requirements, there are some general criteria you will likely need to meet to be eligible for a personal loan.

The general criteria to be eligible for a personal loan is:

You are over 18 years of age;
Be an Australian or New Zealand citizen, Australian permanent resident, or have an eligible visa;
Live in Australia;
Be employed and receive a regular income;
Not be going through the process of bankruptcy.

Each financial institution will likely have different minimum income and credit score requirements, as well as other criteria. Most lenders will require you to provide 90 days worth of bank statements so that they can assess your current financial standing and spending habits. That’s why it’s a good idea to do your own research before applying for a loan and make sure you’re confident you meet the requirements of the lender you’re applying with.

Different types of personal loans

Let’s dive into the different types of personal loans. You might be surprised to learn that not all personal loans are the same. In fact, there are several variations of personal loans. Tippla has compiled a list of the different types of personal loans.

Secured personal loans

One of the most common types of personal loans is secured personal loans. A secured personal loan is when you have a personal loan that has been secured with collateral. This is typically a vehicle (car loan), or with a house (a mortgage). But, with more types of loans coming to the market, other assets can be used to secure a personal loan.

With these types of loans, the asset acts as security, which is where the name “secured” personal loans comes from. Therefore, if you default on your loan, then your asset could be repossessed as a way to cover your repayments.

Typically, secured personal loans are easier to obtain from a reputable lender, because of the extra security. They typically come with lower interest rates and fees as there is less risk for the lender.

Unsecured loans

Unsecured personal loans do not have an asset attached to the loan. Because the lender is taking on more of a risk, you’ll likely be charged higher interest rates and fees than a secured loan.

An unsecured personal loan can be good if you don’t have an asset to use as collateral. However, you might have to convince the company you’re applying with that you’re a reliable borrower through proof of income, your credit score and other factors.

Fixed-rate personal loans

When it comes to personal loans, most of them come with a fixed interest rate which you will need to pay to the lender, on top of the amount you borrowed. What does this mean? The interest rate won’t change for the duration of your loan. This is called a fixed rate personal loan.

Having a fixed interest rate means you can easily budget your repayments, as they shouldn’t change each month. Because your interest rate won’t change, you can also protect yourself from having to pay more, should rates increase during your loan period.

Variable-rate personal loans

A variable-rate personal loan, on the other hand, is where the interest rate can change during the term of your loan. This could see your interest rate fall or increase, depending on the market.

Whilst a variable-rate interest loan can offer you more flexibility and allows you to capitalise on lower interest rates, it does also open you up to more of a risk of having to pay higher interest rates. Paying interest on your personal loan can cost you a lot in the long term.

Overdraft loans

A personal overdraft is kind of like a line of credit, which has been linked to your transaction account. If you run out of funds in your bank account, then the overdraft will activate, allowing you to have access to additional funds.

Similar to a personal loan, you will need to repay the money you spend when accessing your overdraft, plus interest. However, you will typically only be charged interest on the amount that you spend. Say your overdraft is $1,000 and you spend $100, then you’ll pay interest on the $100 you’ve spent – not the full $1,000.

Student loans

In Australia, if you are a citizen and want to study within the country, then you are most likely able to apply for Higher Education Loan Program (HELP), a government student loan.

As part of HELP (also referred to as HECS), the Australian government provides loans to students who are studying approved higher education courses. This means, they don’t have to pay for the course upfront. Instead, once their taxable income reaches a certain level, their repayments will commence.

If you are not eligible for this type of loan, or if you need further assistance for costs related to your study, then there are other options available. Some lenders will offer student-focused personal loans, where the money borrowed must be used for costs associated with your education.

Debt consolidation loans

If you have multiple debts, and you want to pay them off, you can take out a debt consolidation loan. The idea is, you take out one loan, and you use it to pay off your existing debts. Then you only need to focus on repaying one debt.

Some of the benefits of a debt consolidation loan include potentially getting a lower interest rate, and the convenience of only having to manage one debt, instead of several. However, a debt consolidation loan isn’t a one-size-fits-all solution. Taking on a debt consolidation loan could put you into a more difficult financial situation.

If you’re unsure what’s the best option for you, it’s a good idea to reach out to a financial counsellor. You can speak to a counsellor for free, independent and confidential financial advice.

Summing it up

As it can be clearly seen, there are many different types of personal loans. This includes secured and unsecured personal loans, fixed-rate and variable-rate personal loans, overdraft, debt consolidation and student personal loans.

August 16, 2021

Equifax vs Experian: What’s the Difference?

In Australia, your credit score is calculated by three credit bureaus. Out of these three, the two largest for individual credit reports is Equifax and Experian. To help you understand what these companies do and what’s the difference between them, we’ve put together a comparison of Equifax vs Experian.

What are credit bureaus?

A credit bureau, also referred to as a Credit Reporting Agency (CRA), is a company that collects information associated with the credit scores of individuals. If you have any type of credit – say a loan, credit card, or utilities, then the company you have that credit with will report that information (repayment history, credit limit, etc) to a credit bureau.

CRAs collect all the information reported to them and generate credit scores and credit reports for individuals. They then make that information available to banks, non-bank lenders, and other credit providers, with the individual’s consent to allow them to make informed decisions when extending credit.

What are the different types of credit?

Many things can be classified as credit, and the list could surprise you. It’s not just a credit card that you need to be careful with. Here is an overview of some of the types of credit:

Credit can include:

Loans – such as a personal loan, mortgage, business loan, short-term or payday loan and more;
Credit and store cards;
A mobile phone plan;
Internet services;
Utilities – water, electricity and gas;
Hire purchases.

How do credit bureaus receive their information?

Every time you apply for credit, whether it be a loan or utility account, the company that you apply with will send this information to one of the credit reporting agencies so it can be included on your credit report.

Your information will be reported even if you’re not approved for the loan. If you are approved for the loan, then this, along with your repayment history – especially if you default on a repayment, will also be reported on a monthly basis.

In addition to your credit information, public information such as whether you have entered into bankruptcy, or court listings, will be reported to the credit bureaus.

Which CRAs operate in Australia?

In Australia there are three CRAs – Equifax, Experian and illion. Equifax and Experian are the two largest credit bureaus for individual credit scores. This means you don’t have just one credit score and report, you actually have three credit scores and reports – one with each CRA.

Equifax – Equifax is the largest of the three credit bureaus in Australia. It provides both personal and business credit reports across the country. If you want your credit report directly from Equifax, you can order a free copy of your report and receive it in 10 days. However, you can only do this once every 12 months.

Experian – Just like Equifax, you can order a free copy of your credit report with Experian. A subtle difference between the two companies is that Experian is more data-focussed. The company allows credit providers to make more informed decisions through data sharing.

illion – illion, which was formerly known as Dun & Bradstreet, provides credit reports for both individuals and companies. The credit bureau also providers debt recovery services.

Equifax vs Experian: What’s the difference?

Let’s tackle the main question – Equifax vs Experian: What’s the difference? Whilst both of these companies perform a similar role, there are some differences.

Today, we’re only going to look at the differences that concern Australian residents in regards to their credit score. There are likely many differences on a business-level, in terms of company structure, company size, geographic footprint, profit and revenue, and more.

1. How Equifax vs Experian calculates your credit score

One of the main differences between Equifax and Experian is how they calculate your credit scores. Equifax measures your credit score on a scale ranging from 0 – 1,200, whereas Experian’s scale only goes from 0 – 1,000. Because of this, you might have different credit scores across the bureaus.

Your Equifax credit score

Not only is the range they use different between the two CRAs, but also, the algorithms they use to calculate your credit score are different. Whilst the exact formula they use is a well-kept secret, the general factors Equifax considers in its credit score calculations are as follows:

The number of accounts you have;
The types of accounts;
The length of your credit history;
Your payment history.

Your Experian credit score

The general factors Experian uses, on the other hand, have been highlighted by the company as follows:

Type of credit providers that have made enquiries on your report;
The type of credit you have applied for;
Your repayment history;
The credit limit of each other credit products;
Negative entries;
The number of credit enquiries (credit applications) you have made.

2. Which companies report to Equifax or Experian

Another difference between the two bureaus is the companies that report to them. If you are a credit provider, you don’t have to report your customer’s credit information to both bureaus. Because of this, one lender might only report to one credit bureau, whilst one bank might only report to the other.

That means your credit scores can differ across the two bureaus. In fact, you could have a credit score with one bureau, but none with another, because of this reason.

Which credit bureau matters the most?

One question we get asked at Tippla quite often, is which credit bureau matters the most? Unfortunately, that’s not such a straightforward question, as they all matter. Whilst Equifax is the largest out of the three, you have a credit score and report with each of the bureaus and either one of these can be accessed by a credit provider when you apply for some form of credit.

Why does my credit score matter?

Equifax, Experian and illion are all responsible for calculating your credit score. But why does your credit score matter in the first place? Putting it simply, your credit score and credit report is one of the factors considered by credit providers when they are reviewing your application. They use your credit score to determine whether they will lend you money or extend you credit.

Because of this, your credit score could be the difference between you being accepted or rejected for credit. If you have a good credit score, then this will strengthen your application. If you have a below-average credit score, then this could hinder your application. In a worst-case scenario, it could even lead to you being rejected for credit.

Your credit score can influence the following:

Whether you are approved or rejected for credit;
Your interest rate;
Your borrowing limit;
Other credit conditions, such as fees and charges.

Whilst your credit score isn’t the only factor credit providers consider, it is an important element. Credit providers might also check the following:

Your bank statements;
Employment status and income;
Government benefits;
Gambling;
Eligibility for a loan – are you a citizen/resident and are you over 18 years of age.

How to improve your credit score

If you have a below-average credit score, then there are a number of ways you can improve your credit score. Tippla recently put together a helpful guide to steer you through the process, but to sum it up, here are a few things you could try:

Space out your credit applications;
Make your repayments on time;
Check your credit report frequently;
Don’t borrow more than you can afford.