5 Ways to Reduce Credit Card Fees

reduce credit card fees

Whilst credit cards can be a useful tool, they often come with a range of different fees. Credit card fees can end up costing you a lot of money in the long run. That’s why we’ve put together this helpful guide on how to reduce credit card fees in 5 simple ways.

reduce credit card fees

What is a credit card?

Before we dive into the ways you can reduce credit card fees – let’s start with the basics. What is a credit card? A credit card is a line of revolving credit at a set limit that refreshes periodically, generally each month. 

You can use a credit card to make purchases, balance transfers and cash advances. When you take out a credit card, you do so with the condition that you pay back the money that you spent, plus any additional interest. At the very least, you’ll have to make the minimum repayment each month by the due date.

Different types of credit cards

There are many different types of credit cards which all come with their unique benefits and downfalls. One key rule to keep in mind – if you are getting some kind of benefit, such as rewards, low-interest rates or no annual fee, you are often paying for it in another way. This could be through extra fees or higher interest rates. That’s why it’s a good idea to weigh the pros and cons before deciding on which card is right for you.

Here are some of the most common types of credit cards:

  • Low-interest credit card – a low-interest credit card, is a card that offers a lower interest rate than normal. However, to offset the lower interest rate, these types of cards often come with a higher annual fee, more restrictions and fewer rewards.
  • Balance transfer credit card – A balance transfer credit card allows you to transfer your credit card debt from another credit card to this one. A balance transfer credit card usually comes with lower interest rates or even an interest-free period. This allows you to repay your debt and save paying interest on your other card. However, this card is only beneficial if you can pay it off within the low or interest-free period, otherwise, it could end up costing you more.
  • No annual fee credit card – like the name suggests, this kind of credit card doesn’t come with an annual fee, either for a set period or for the life of the card. However, you’ll usually be charged higher interest rates, which could cost you more in the long run.
  • Rewards credit card – This kind of credit card gives you some kind of reward when you make purchases, whether it’s frequent flyer points, retail rewards, supermarket rewards, cashback deals, and petrol rewards. 

Common credit card fees

There are several different credit card fees that you’ll need to keep an eye out for. What fees you’ll be charged, and how much they’ll cost you, completely depend on your specific card. That’s why it’s important to read the terms and conditions carefully before applying for a credit card.

Here’s a breakdown of some of the most common credit card fees.  

Annual Fees Most credit cards come with an annual fee which you’ll be charged each year. The cost of this fee will vary depending on which credit card you have.
Interest Just like an annual fee, most credit cards come with interest. You will be charged interest when you carry a balance (when you don’t completely pay off your credit card debt for the month). 

There are different types of interest rates. They might be called: purchase rate, cash advance rate, balance transfer rate or promotional interest rate. 

Balance transfer fee A balance transfer is when you move your existing debt onto a new account. This can allow you to get on top of your debt, but, you’ll generally be charged a fee to do so.
Cash advance fee When you withdraw money from an ATM with your credit card or buy foreign currency – this is referred to as a cash advance. When you perform either of these actions you will generally be charged a cash advance fee.
Late payment fee Your credit card limit typically refreshes each month. At the end of your monthly period, you’ll receive your bill for how much you’ve spent. With credit cards, you don’t have to repay the full amount, but you’ll pay at least the minimum amount by the due date to avoid late payment fees. If you don’t, then you’ll likely be charged a late payment fee.
International transaction fee If you use your card overseas or make a purchase online with an international merchant, you will likely be charged a fee. An international transaction fee can also be called a foreign transaction fee or a currency conversion fee.

How to reduce credit card fees

Now that you’re armed with all of the information you need on types of credit cards and common fees, let’s get stuck into how to reduce credit card fees. Here are five things you could do.

1. Pay your card off in full before the due date

Each month, you will receive your credit card bill. If you don’t pay this off by the due date, you will be charged late fees and interest. If you pay the full amount off each month, not only will you avoid late fees, but you’ll also avoid having to pay interest on the amount carried over into the next month. This is a great way to reduce credit card fees.

Or, at least make your minimum repayment by the due date

If you can’t repay your credit card balance off in full each month, you should try and at least make your minimum repayment. Your minimum repayment is the lowest monthly repayment you can make without incurring late fees. The minimum monthly repayment is usually about 2 or 3% of the total amount you owe for the month.

By paying the minimum repayment by the due date, you won’t have to pay late fees. However, you’ll still accrue interest on what’s still owing, and this could cost you a lot in the long run.

Therefore, if you want to reduce credit cards fees, you could try and repay your balance off in full each month, or at the very least, make your minimum repayments. It is also worth highlighting that many credit cards, especially low-interest rate credit cards, will void the credit card offer or rewards system if you are late with a payment.

2. Opt for a low annual fee credit card

There are certain credit cards on the market that offer good deals for the annual fee. Some cards might offer a low annual fee and some might offer no annual fees either for a certain time or for the life of the card.

Whilst this is a good way to reduce credit card fees, it is important to highlight that many of these cards will offset the lower annual fee with higher interest rates. This could cost you more in the long run. That’s why it’s a good idea to weigh your options and see what’s the best decision for you.

3. Avoid using your credit card to make ATM withdrawals

When you use your credit card to withdraw money from an ATM, this is called a cash advance. Just like any other purchase you make with your credit card, you will need to pay this back. What’s more – most credit card providers charge a fee for cash advances. How much the fee is, depends on your specific card. 

If you want to reduce credit card fees, you could do this by not using your credit card to withdraw money from an ATM. If you need to withdraw money from an ATM, you could use your debit card instead, which might not charge you any fees.

4. Don’t use your credit card for international transactions

If you want to avoid being charged a fee for international transactions, there are two ways you can go about this. The first is you can shop around and look for a credit card that doesn’t charge a fee for international transactions. Alternatively, you could avoid making foreign transactions on your card altogether. Either of these options could help you reduce credit card fees.

5. Do your research before applying for a credit card

The final tip to reduce credit card fees is to do your research before applying for a credit card. Think of why you want a credit card and then try and find the best one for your needs. You could compare interest rates, fees, and find one that best aligns with your needs.

Does a Personal Loan Harm My Credit Score?

Does a Personal Loan Harm My Credit Score

There are many reasons you might want to take on a personal loan – an unexpected expense, an upcoming holiday, or even to cover a medical bill. But if you’re wondering “does a personal loan harm my credit score?”, Tippla has done the legwork for you! Below you’ll find the information you need to know.

Does a Personal Loan Harm My Credit Score

What is a personal loan?

A personal loan is a type of credit that allows you to make big purchases or consolidate your debts. These types of loans are repaid with interest over a fixed term, ranging from months to years. You can apply for a personal loan from a bank, credit union, or online lender.

The reason for taking out a personal loan can vary. Here are some examples:

  • Consolidating debt;
  • Big purchases: car, holiday, wedding, renovations, medical, etc;
  • To cover unexpected expenses.

If you decide to apply for a personal loan, it can be overwhelming to see how many options are out there. It can be difficult to understand what’s the best loan for you. Here are some key factors to keep an eye out for when comparing loans:

  • Interest rate;
  • Repayment terms;
  • Borrowing limits (minimum and maximum amounts);
  • Fees;
  • Collateral requirements.

Types of personal loans

There are many options for personal loans. That’s why it’s important to understand your personal and financial situation so you can choose the best option for you. Here’s a breakdown of the two most common types of personal loans:

Secured loan: a secured personal loan is a loan guaranteed by an asset, such as a car, motorbike, or something similar. The asset acts as security and if you default on your loan, then you’re at risk of losing the asset.

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

Unsecured loan: as the name suggests, an unsecured personal loan has no asset attached to the loan. Because of this, the lender is taking on more risk which means you’ll generally be charged higher fees and interest rates than a secured loan. This type of loan is good if you don’t have an asset, though you may have to convince the lender that you’re able to make the repayments through proof of income, and if this is your first loan, you may require a guarantor for security. 

What is a credit score?

Before moving straight into discussing the question “does a personal loan harm my credit score”, let’s take a moment to talk about credit scores. Let’s start with the most important question – what is a credit score? A credit score is a number that ranges from 0 – 1,200. 

A lot of people don’t know how credit scores are calculated. To put it simply, your rating is based on the information contained in your credit report. Your report considers factors such as your repayment history, your credit accounts and even how many times you have applied for credit.

A good credit score indicates to lenders that you have a high level of creditworthiness. The better your score, the more likely you will be approved for a loan and reap the benefits of a higher loan amount and/or lower rates. Your score falls somewhere on a five-point scale ranging from below average up to excellent. 

Equifax and Experian credit scores

Source: Equifax and Experian

Does a personal loan harm my credit score?

Unfortunately, there isn’t a simple answer to “does a personal loan harm my credit score”. Like any form of credit, a personal loan will affect your credit score. But how it affects your score depends on how you handle the personal loan.

When you first make an application for the loan, your credit score will be lowered. Whilst your credit rating will take a hit when applying for the loan, after this point, a personal loan can be beneficial for your score. When used responsibly, your credit score can improve when you take out a personal loan. 

Let’s take a closer look at this.

Applications

When searching for the right personal loan you should try and minimise the number of applications you make. Why is this? When you apply for a personal loan, you are giving the company you’re applying to permission to check your credit report. When they check your credit report this is referred to as a hard enquiry. Hard enquiries harm your credit score, regardless of whether you are approved.

A large number of applications within a short period of time are not viewed positively. Not only will the multiple applications harm your credit score further, but future lenders may also assess your application and deem this proof of you being rejected previously, thus making you a risky borrower.

Instead, you could consider researching your options further and only make one application for the loan which best matches your criteria.

Repayments

If you fail to repay the loan, it will appear on your credit report as a default. This will negatively impact your credit score. Not only will this stay on your credit report for five years, but you may also lose the asset you used to secure the loan (if applicable) or run the risk of having to deal with debt collectors.

What to consider before taking on a personal loan

So we’ve covered the question of does a personal loan harm my credit score, but what about the factors you should consider before taking out a personal loan? Here are some things you should consider before applying for a loan.

Do you meet the loan requirements?

The first thing you can consider is whether you meet the requirements for a personal loan. The basic requirements of any loan are that you are over the age of 18, have a regular income, be a permanent Australian resident (or hold an acceptable non-resident visa), and can provide an overview of your current financial situation.

Check the terms and conditions

The next step you could take is to look into the finer details of your loan. The interest rate is the amount that the financial institution charges in addition to the money you’ve borrowed. Aiming to find the lowest interest rate means that you can focus on paying off your loan rather than extra interest. 

On top of interest rates, you may also have fees associated with your loan. All loans have different associated fees; some to look out for include establishment, servicing, early repayment, early exit, insurance, and withdrawal fees. 

How long is your loan term?

Another factor worth considering is the term of the loan. The length of your personal loan will determine the amount of interest you are charged over its life. Typically, the longer the loan, the lower the monthly repayments. 

How will you pay off the loan?

When taking on a loan, it is important to know beforehand how you will pay off the loan. Whether you choose to opt for weekly, fortnightly, or monthly repayments – or even want to pay it off sooner than the term. Such elements are great starting points to consider before making any personal loan applications.

Effectively manage debt

As we’ve addressed in this article, the question “does a personal loan harm my credit score” isn’t a straightforward one. But if you can effectively manage your personal loan and your debt, then you could actually make your loan work for you.

Here are some easy steps you could take to effectively manage your debt:

  • Consistently make your repayments;
  • Don’t borrow more money than you can afford;
  • Consolidate your debt;
  • Take the time to look for the loan that offers the best value instead of creating multiple applications;
  • Consider making extra repayments if you can;
  • Seek expert advice if you encounter trouble.

What’s The Difference Between Credit Cards And Personal Loans?

credit cards and personal loans

If you are looking for extra finance, whether it’s to make a big purchase, cover unexpected expenses, or build a credit history, there are two main options available for you – a credit card or personal loan. These two types of credit are very popular in Australia, but we’re here to break down the difference between credit cards and personal loans, so you can choose what’s best for you.

credit cards and personal loans

What is a credit card?

Before we jump into the difference between credit cards and personal loans, let’s start with the basics – what is a credit card? Literally speaking, a credit card is a piece of plastic or metal that is issued by a bank or financial services company. 

You can use a credit card to pay for goods and services, as well as any personal expenses that may arise. A credit card is a line of credit that you can use to pay for personal or business expenses on the promise that you repay the money back, often with interest. Your credit card is a revolving line of credit, which means it refreshes after a certain period of time – typically each month, and it will continue to do so up until you cancel the card.

Because a credit card is a line of credit, this means you don’t need to have the money physically in your bank account, as is the case with a debit card. This is where credit cards and personal loans are similar.

Different types of credit cards

In Australia, there are many different types of credit cards. Whilst the basics stay the same, the different types of credit cards all come with their unique purposes and benefits. Here’s a quick overview of the different options available to you.

Low-interest credit cards As the name suggests, a low-interest credit card is a credit card that offers a lower interest rate than normal. Many credit cards charge 20% or more on purchases, whereas low interest-rate credit cards generally have an interest rate that’s 14% or lower. These cards can also come with no interest periods, typically up to 55 days. However, low-interest credit cards can generally come with more restrictions, fewer rewards and a higher annual fee.
Balance transfer credit cards A balance transfer credit card is when you transfer your outstanding debt from one credit card to your balance transfer credit card. The balance transfer credit card usually has a low interest rate or sometimes even a 0% interest rate for a limited time. 

This allows you to repay your existing debt, and try and repay your new debt with the balance transfer credit card within the interest-free or low-interest period, which can save you money. However, if you can’t repay it within this period, then it might cost you more in the long run.

No annual fee credit card Most credit cards come with an annual fee that you have to pay each year across the life of your credit card. A no annual fee credit card is a type of credit card where you don’t have to pay this fee. 

There are two main types of no annual fee credit cards – the first is where you don’t have to pay an annual fee during the whole life of the credit card, the second is where you don’t have to pay an annual fee during an introductory period, which usually lasts for 1 or 2 years.

To offset the lack of an annual fee, these types of credit cards usually come with higher interest rates, which could actually cost you more in the end.

Rewards credit card Rewards credit cards give you some kind of reward, usually in the form of points, every time you make a purchase. There are many different types of rewards cards, and the points can be used for things like – retail rewards, supermarket rewards, cashback deals, frequent flyer points and petrol rewards.

Whilst these cards can give you bonuses, they don’t come for free. Generally speaking, rewards cards often come with higher annual fees and it can take a while for the points to build up (and they can expire). So, it’s important to read the terms and conditions carefully and weigh up the pros and cons.

Cashback credit card With cashback credit cards, you can get cashback when you make purchases. This can come in the form of a cash voucher or money credited back to your account. However, as with all types of credit cards – when there are perks, that generally means higher fees. 

In this instance, cashback credit cards often come with higher interest rates and an annual fee. Some cards can also cap how many cashback points you can earn.

Frequent flyer credit card A frequent flyer credit card is a common type of rewards credit card, and it’s great for those who love to travel. When you spend on your frequent flyer credit card, you’ll accrue points. When you build up enough points you can put them towards flights and either get cheaper flights or have the whole cost covered by points – depending on how many you have.

The downsides to this type of credit card are that the frequent flyer points can expire. These types of credit cards also generally come with standard credit cards fees such as – annual fee, program fee, cash advance fee and more.

Platinum or black credit card Platinum or black credit cards are high-end credit cards. You can get a number of benefits with these cards – exclusive dining and travel deals, as well as rewards points that don’t expire. If you’re over 18 and earn more than $50,000 each year, have a good credit score, then you can apply for one of these credit cards.

Some of the drawbacks of a platinum credit card include much higher annual fees and interest rates.

What is a personal loan?

Similar to a credit card, a personal loan is a line of credit that allows you to pay for personal expenses – whatever they may be. A personal loan allows you to borrow a specific amount of money under the agreement that you pay it back within a predetermined time period, referred to as the loan term, with interest. 

The interest rate you are charged will depend on a couple of factors, including your credit score. Want to see where you’re at? Check your credit score with Tippla here.

When taking on a personal loan, you can get a loan with a fixed or variable interest rate. You can also choose between a secured or unsecured personal loan. 

Different types of personal loans

There are a couple of different types of personal loans. Here is a breakdown below.

Secured and unsecured personal loans

The two main types of personal loans are secured and unsecured personal loans. A secured personal loan is when you take on a personal loan that is guaranteed by an asset such as a car. This asset is used as security against you defaulting on your loan. If you default on your repayments and can’t afford to repay the loan, then you are at risk of losing your asset.

Secured personal loans are generally used to purchase the security you’re using against the loan. Let’s break that down. Say you want a loan to buy a car, then the car you buy will be the security on the loan.

One of the benefits of a secured loan is that you can generally get lower interest rates. Interest rates are set to protect the lender against the risk of you defaulting on your loan. Because your asset serves as collateral, the lender can afford to offer you lower interest rates, because they have already hedged against the risk of you defaulting on your loan.

Unsecured personal loans, on the other hand, is a personal loan that you don’t have to provide any security for. Reasons for taking out an unsecured personal loan range from holiday expenses, home improvements, unexpected expenses, medical bills and more.

Because there’s no security against the loan, the interest rates are generally higher for unsecured loans. But on the plus sign, the application and approval process is usually quicker.

Fixed or variable interest rate personal loans

When it comes to interest rates on personal loans, the most common are either fixed-rate or variable-rate loans. Here’s what that means. A fixed-rate personal loan is when the interest stays the same for the whole loan term.

One of the perks of this is it allows you to easily budget for your repayments, as they stay the same each month. However, a downside of this is you could miss out on your interest rate being reduced if interest rates go down. On the flip side, if interest rates go up, then you’re protected with a fixed-rate personal loan.

Variable-rate personal loans are when the interest you’re charged each month isn’t the same, and it can fluctuate depending on the market. Some of the pros of this type of loan include – fewer repayments because you can make earlier repayments and pay off your loan sooner, more flexibility and potentially lower interest rates.

Although there are some positives to choosing this type of loan, there are still some things to consider. Namely, you might end up having to pay more in interest if the interest rate rises. This can cost you in the long run.

What’s the difference between credit cards and personal loans?

Whilst there are many similarities between a credit card and a personal loan, there are also some differences. So what is the difference between credit cards and personal loans? Here are the main points:

Borrowing amount

When you are approved for a personal loan, you will be given a set amount of money in a lump sum at the beginning of the loan term. You can’t spend more than the amount you have been given unless you take out an additional loan. With a credit card, the borrowing limit refreshes each month, so your borrowing limit is more flexible than a personal loan.

Length of term

Personal loans generally come with a fixed term, whether it be a couple of months or years, and they come with a termination date. Credit cards, on the other hand, are a revolving line of credit and refresh each month. For most credit cards, you can have them for as long as you want – whether that’s a month, years, or even decades. The length of time is determined by you as the customer.

Interest rates

Personal loans generally have lower interest rates than credit cards. According to the Reserve Bank of Australia (RBA), the average variable interest rate for a personal loan as of September 2020 was 14.41% and 12.42% for a fixed personal loan. Whereas the average credit card interest rate ranges from 16-18%, according to numerous comparison sites. However, you can avoid paying interest on your credit card if you pay off the card balance in full each month.

Rewards

Although credit cards might have higher interest rates, they generally come with more rewards and perks. As we covered above, sometimes you might end up paying more for these perks, but if you use them wisely, you can make them work for you.

What’s the right decision for me?

Now you know the difference between credit cards and personal loans, you might now be thinking about what’s the best choice for you. At the end of the day, only you know your financial situation. However, there are a couple of things you can consider when choosing between a credit card or a personal loan. 

Firstly, if you have control over your spending and can follow a budget, then a credit card might meet your needs. Whereas if you’re looking to make a big one-off purchase or pay for an expense, a personal loan might be better for you.

If you’re unsure, you can speak to a free financial counsellor who can help you make the best decision for your personal situation.

What Affects My Credit Score? A Quick Guide

what affects my credit score

Whether you’re applying for credit or simply want to know more, we hear you, and we’re here to answer the age-old question of what affects my credit score? Tippla has provided a breakdown below.

what affects my credit score

What is a credit score?

Before answering “what affects my credit score”, let’s first discuss what is a credit score? Your credit score is a number that ranges from 0 – 1,200, based on the information contained within your credit report. Your score falls somewhere on a five-point scale ranging from below average up to excellent. Your credit score indicates to lenders your creditworthiness; the higher your score, the more reliable you appear to a potential lender. 

What is a good credit score?

Due to Experian and Equifax calculating your credit score differently, the categorisation of the “below average” to “excellent” scale differs between the bureaus. 

good credit score

Source: Equifax and Experian

What’s the difference between a credit score and a credit report?

Your credit score is a number falling somewhere between 0 – 1,200, depending on the reporting agency. In contrast, your credit report includes detailed information regarding your credit history. Your credit score is calculated based on the information contained in your credit report. If you’re still confused about “what affects my credit score”, it’s the information contained within your credit report.

What goes onto your credit report

Many things go onto your credit file, and all of this information will have some kind of impact on your credit score. It’s not just your credit accounts that appear on your report; phone bills, personal loans, and payments to utility companies will also feature on your report. 

Your personal finances, such as checking and savings accounts, have little to no effect on your credit score, as your credit report is only concerned with the money you owe or have previously owed. However, in some unique situations, your personal finances may be affecting your credit score.

What affects my credit score? 

In Australia, you have three different credit scores; here at Tippla, we provide you with your Equifax and Experian scores. It’s important to note that these scores may be slightly different, as they are scored on different scales and attribute different values to the contributing factors. 

Here’s what goes onto your Equifax credit report:

  • Type of credit provider
  • The type and size of credit requested in the application
  • Number of credit enquiries and shopping patterns
  • Directorship and proprietorship information
  • Age of your credit report
  • The pattern of credit enquiries over time
  • Personal information
  • Default information
  • Court writs and default judgements
  • Commercial address information

Here’s what goes onto your Experian credit report:

  • Type of credit provider
  • Type of product that was applied for
  • Repayment history
  • The credit limit on each of the credit products
  • Amount of credit enquiries
  • Any negative events

What harms my credit score

When understanding what affects my credit score, it’s equally important to look at what is also harming it. At Tippla, your reports come from the two leading credit bureaus in the world – Experian and Equifax, each of which considers different factors as detrimental when calculating your credit score.

What harms your Equifax credit score

  • Late repayments
  • Applying for a large amount of credit in a short period of time
  • Closing a credit account
  • Stopping credit-related activities for an extended period
  • Negative public records, such as bankruptcy

What harms your Experian credit score:

  • A large number of credit applications in a short period of time
  • Open accounts with debt collection agencies
  • Short term credit
  • Missed payments
  • Bankruptcy actions
  • Defaults
  • Court judgements

It is essential that you check all your information listed in your credit report to make sure there aren’t any mistakes that could diminish your score. Specifically, check to see that any of the debts and loans are yours and your personal details such as your name and date of birth are correct. If you find any errors or out-of-date information, contact that credit reporting agency and ask them to fix the mistakes.

What improves my credit score

Whether you’ve just checked your credit score and it wasn’t quite as high as you expected, or maybe you just want it to be even better, you can take steps towards improving it when you know what affects your credit score. Maintaining a good credit score means that you are more likely to be approved for different types of accounts and are more likely to get better interest rates when applying for a loan.

When you receive your scores, you should also be able to see the risk factors impacting your score the most; from this information, you can see where changes should be made and make a conscious effort towards doing so. It should be noted that any actions you take won’t see immediate change, and you’ll need to allow time for your creditors to report your positive behaviour before it is reflected in your credit score.

Tips to improve your credit score 

Changing your behaviour can help improve your score over time. You could start by paying your bills on time, as your previous payment history is an indication of your future performance. You could also ensure that you pay off debt and keep balances low on your credit cards and other revolving credit.

You could also improve your credit score by only applying for and opening new credit accounts as necessary. Taking on unneeded credit can damage your score by creating too many hard enquiries or simply tempting you to overspend and accumulate more debt. 

In addition, applying for too much new credit can harm your credit score because it results in numerous hard enquiries, which remain on your report for two years. 

How to fix my credit score

Now that we’ve answered the question of what affects my credit score? Let’s discuss how you can fix your score. 

Credit repair companies offer to quickly fix your credit score by correcting the visible issues on your credit report. Unfortunately, many of the issues can’t be resolved immediately and are things you could do yourself (for free). By reading through your credit report and understanding your score’s contributing factors, you can change these behaviours to prevent yourself from a further decline. 

An important thing to remember is the time taken to fix your credit score can vary, depending on how severe the negative entry is:

  • Enquiries remain for two years.
  • Late repayments can take seven years to leave your credit report. 
  • Public record items can remain on your report for seven years, but some cases of bankruptcy can stay for ten years.

Rebuilding and improving your credit score does take some time, and there aren’t really any shortcuts you can take. One of the best steps you can do is to check your credit scores with Tippla today; from there, you can review which factors negatively affect your score and then head over to the Tippla Credit School to learn more about improving your rating.

How To Check My Credit Report For Free

How To Check My Credit Report For Free

Your credit report is an important document that gives you a clear overview of your credit history and current standing. It’s no wonder a lot of people ask us “how to check my credit report for free”. Tippla has the breakdown for you below.

How To Check My Credit Report For Free

What is a credit report?

Your credit report is a document that outlines your credit history. It is a summary of how you have handled your credit accounts and managed your debt. If you have a personal loan, home loan, credit card, or your name is on a utility bill, then you will have a credit report.

In Australia, you have a credit report with three credit bureaus – Equifax, Experian, and illion. Each month, your creditors and lenders will report your credit information – such as your repayment activity and history, to one of these three bureaus. The information reported by these financial institutions is what makes up your credit report.

The information on your credit report is what’s used to determine your credit score – a number ranging from 0 -1,200. It provides an indication of how reliable of a borrower you are. If you have positive information on your credit report – such as a reliable repayment history, then you will likely have a good credit score. 

However, if your credit report is filled with negative entries, such as defaults, bankruptcy, etc, then you will likely have an average to below-average credit score.

What goes onto your credit report?

There are many things that go onto your credit report, as outlined by Equifax, your credit report contains the following types of information:

Personal information Your credit report will contain certain information about your identity, such as your name, address and date of birth. It won’t include information such as your marital status, salary, etc.
Credit account information Listed on your credit report will be your credit account information. This includes the type of accounts you have, such as a credit card or loan, the date it was open and your credit limit.
Repayment history Your repayment history for your credit accounts will be listed on your credit report.
Credit applications Your credit report will list all of the enquiries that have been made on your report. There are two types of enquiries – hard or soft. Hard enquiries are when a lender or creditor looks at your report when you apply for a loan or type of credit. 

Hard enquiries affect your credit score. A soft enquiry does not affect your credit score, and ranges from you checking your own report or if a company checks your report for a pre-approved offer. If you have applied for credit, then it will show on your report.

Bankruptcies and defaults Your credit report contains negative entries, if applicable. This can include bankruptcies and defaults. Bankruptcy will stay on your credit report for up to 5 years. If you have defaulted on any of your credit repayments in the past 5 years, then it will appear on your credit report.

How long do items stay on your credit report?

Let’s get stuck into how long items stay on your credit report. Here’s a breakdown:

  • Credit accounts – all of your current accounts, and any that you have closed in the past 2 years;
  • Credit applications – any application you have made for some time of credit will remain on your report for 5 years;
  • Repayment history – your repayment history over the past 2 years will appear on your credit report;
  • Defaults – if you have defaulted on any repayments in the last 5 years then it will appear on your report;
  • Court judgements and bankruptcies – 5 years;
  • Serious credit infringements – these can stay on your credit report for up to 5 years.

Why does my credit report matter?

There are many reasons why your credit report matters, but we’ll take you through a few. One of the main reasons why it’s important to check your credit report and keep it, and your credit score healthy, is because it affects your ability to borrow.

If you have a lot of negative entries on your credit report, such as numerous defaults, then you will be perceived as a riskier borrower. Because of this, you might find it much harder to be approved for credit. 

Not only that, but the credit or loans you are approved for will likely come with higher interest rates, more fees and smaller borrowing limits. If you don’t take care of your credit report and credit score, then it can limit your finances, and as a result, your life. 

If you move into a new house or apartment and you need to sign up for your utilities, such as electricity and water, if you have a bad credit report and a low credit rating, then you might also be rejected by providers because you’re deemed too high of a risk. You could also struggle to get a phone contract.

Your credit report can also be valuable in helping you detect identity theft. If you check your credit report and see that something that doesn’t add up, such as a credit account you don’t recognise, then this could either be a mistake or an indication that someone has stolen your identity and is using it to open credit accounts. That’s why it’s important to check your credit report frequently.

How to check my credit report for free?

Now that you understand what your credit report is and its importance, let’s answer the question “how to check my credit report for free”. There are a few ways you can do this, and it depends on how long you’re willing to wait.

Request your report from the credit bureaus

If you would like to view your credit report for free, you can request a free copy from each of the bureaus – Equifax, Experian, and illion. However, it is important to highlight that you will have to wait approximately 10 days if you want to get a free copy. 

Generally, the bureaus will only allow you to see your credit report free once a year. You may have to pay for a copy of your report from the bureaus if you request a copy more than once a year, and if you want to receive it faster than 10 days.

Sign up to a platform like Tippla

This is where platforms like Tippla come in handy! With Tippla you can view your credit reports and credit scores from the two largest credit bureaus in the world – Equifax and Experian. On Tippla you can access your free personal Equifax credit report and your free personal Experian credit report.

Signing up to Tippla is completely free and you can view your credit report and score as often as you want – it won’t hurt your score. Your report is updated every 90 days, so you can see how you’re tracking throughout the year.

Does checking my credit report hurt my credit score?

No, it doesn’t! You can check your own credit report as often as you like, it won’t hurt your credit score or reflect badly on your report. This is because when you look at your own report, it is registered as a soft enquiry. Soft enquiries don’t affect your credit score.

The damage is done when you apply for a loan or type of credit, like a credit card. This is because when a lender or creditor views your report to see if you are a reliable borrower, this registers as a hard enquiry. Hard enquiries initially harm your credit score and will remain on your report for up to 5 years.

For more information on what affects your credit score and report, head to Tippla’s financial blog to find everything you need to know and more.

How to Remove Negative Entries From Your Credit Report

how to remove negative entries from your credit report

Negative entries can have a serious impact on your credit score. If you want to know how to remove negative entries from your credit report then we’ve got the breakdown below.

how to remove negative entries from your credit report

What is a negative entry on your credit report?

A negative entry is some kind of information on your credit report that lowers your credit score. The term negative entry encases any bad financial behaviour that indicates that you haven’t effectively managed your debt. 

Examples of negative entries include:

  • Late payments on loans or credit cards;
  • Delinquent accounts;
  • Charge offs;
  • Bankruptcies;
  • Accounts that have been sent to collection;
  • Foreclosures.

Therefore, if you’ve ever defaulted on a repayment for some kind of credit, say your personal loan, then that will be listed on your credit report. This is classified as a negative entry and would have lowered your credit score when it was first added.

How long do negative entries stay on your credit report?

The length of time a negative entry will remain on your credit report depends on what the negative entry is. Here’s an overview:

What stays on your credit report and for how long
Defaults If you have defaulted on any credit repayments, it will show on your credit report for 5 years.
Court Judgements If you have received any court judgements, it will appear on your credit report for 5 years.
Bankruptcies If you enter into bankruptcy, it will show on your report for up to 5 years.
Serious Credit Infringements Any serious credit infringements will stay on your report for up to 7 years.

How do negative entries affect your credit score?

To put it simply, negative entries on your credit report will negatively affect your credit score. When the negative entry is first put on your report, your credit rating will fall. By how much depends on the credit bureau and what kind of negative entry it is. See one of our latest articles for an overview of how your credit score is calculated.

If you show consistent negative credit behaviour, such as continuously defaulting on payments, going into bankruptcy, etc., then your credit score will continue to suffer. However, if you have only one negative entry on your credit report, and since then, you have only displayed positive behaviour through your credit history and continue to do so, then your score might recover, or only be affected minimally. 

According to Equifax, one of the main credit reporting bodies in Australia: “It is unlikely one late payment, depending upon how late the payment was, followed by making your repayments on time, will significantly impact your credit score, however, several late payments could be an indication you are in financial stress and may negatively impact your credit score.”

How to remove negative entries from your credit report?

Now you know what negative entries are, and how long they stay on your credit report, let’s answer the question “how can you remove negative entries from your credit report”. 

The answer to this question has a couple of layers, and it all boils down to – is the information correct, or is it incorrect? 

If the information is correct

As highlighted by MoneySmart, if the information is correct, even if it is negative and harms your credit score, then you can’t remove it from your report. Instead, you’ll have to wait 5-7 years for the negative information to leave your credit report naturally.

If there has been a mistake

If there has been some kind of mistake then you should be able to remove it. If you notice a negative entry on your credit report that you don’t recognise or is incorrect, the first thing you should do is reach out to the relevant credit provider. 

If they find that there has been some kind of error on their side, then they should rectify the mistake with the relevant credit reporting agencies, and it will be removed from your credit report. It’s a good idea to keep a close eye on your report to make sure they do remove the negative entry on your credit report.

Whilst this is the general rule, there are nuances for each negative entry. Let’s take a closer look, and see what requirements need to be met so you can remove negative entries from your credit report.

Defaults on your credit report

A default is when your credit or loan repayment has been overdue for at least 60 days, or the overdue payment is equal to or more than $150. According to the Office of the Australian Information Commissioner (OAIC), for a default to be listed on your credit report, the provider that you owe money to must have sent you a notice to your last known address to inform you of the overdue payment and request payment.

Then, the provider must send you a second notice at least 30 days later to inform you that if you don’t make the payment, then they will disclose it to a credit reporting body.

Once this second notice has been sent, the provider then has to way at least 14 days after issuing the second notice before informing a credit reporting body of your default. Furthermore, the OAIC highlights that the credit provider can’t wait more than 3 months after issuing you with the second notice to list the default.

“If a credit provider mistakenly sent the notices to an old address that was not your last known address then the default listing may not be valid. However, if they sent the notices to an old address because you failed to update your contact details then the credit provider is likely to have met the notice requirements,” the OAIC highlights.

How to remove defaults from your credit report

After a default has been listed on your credit report, it will remain for 5 years. If you pay the overdue amount after your credit provider has listed the default, then the listing will remain on your credit report, but the status will be updated to reflect that the payment was made.

If you want to remove the default from your credit report, the only way you can do that is if the default is not valid. If you can prove that there has been some kind of mistake, or that the credit provider has sent your notices mistakenly to an incorrect address, then the default might not be valid.

However, if the credit provider sent the notices to an old address because you didn’t update your contact details, then according to the OAIC, the credit provider is likely to have met the requirements and the default is valid.

If you can prove that the default is somehow invalid, you can get it removed from your report. If you can’t and the default is valid, then it will remain on your credit report for up to 5 years.

How do defaults affect my credit score?

If you do end up having a default on your credit report, how will it affect your credit score? Equifax outlines that a default on your report will negatively impact your credit score.

“If you have a default on your credit report you can lessen the impact of the default on your score by making repayments on time. This more recent good behaviour can help improve your score.” 

Bankruptcies and court judgements

In Australia, bankruptcy normally lasts for 3 years and 1 day, although it is possible to get out of bankruptcy earlier. As highlighted by the Australian Financial Security Authority (AFSA) your credit report will continue to show your bankruptcy for either:

  • 2 years from when your bankruptcy ends or
  • 5 years from the date you became bankrupt (whichever is later).

The Consumer Action Law Centre, an advocacy organisation, outlines that for a bankruptcy or court judgement to be removed from your credit report, then you would need to have the public record details changed to have the listing removed from your credit report.

“Credit reporting agencies obtain court judgment and bankruptcy information directly from the Courts and the Australian Financial Security Authority records. This might involve having the court judgment set aside,” the organisation states.

As was the same with defaults, you can only have bankruptcies and court judgements removed from your credit report if they are inaccurate.

How does bankruptcy affect your credit score?

Like all negative entries, the question of how does bankruptcy affect your credit score is complicated. This is because the exact formula credit bureaus use to calculate your credit score varies between each of them, and only some information is public knowledge.

However, what we do know is that going into bankruptcy will harm your credit score. This is because it sends a clear signal to credit providers that you couldn’t effectively manage your debt and you have a high risk of defaulting on your repayments.

Protect your credit score

As the saying goes, prevention is better than cure. If you want to avoid having negative entries on your credit report, then the best thing you can do is avoid defaulting on payments, serious credit infringements, court judgements and bankruptcies.

In some cases, this is easier said than done. Sometimes life can throw you a curveball. Because of that, here are some things you could try to help you stay on the right path:

  • Create a budget and limit your spending to only what you can afford;
  • Set up an emergency fund to cover unexpected expenses;
  • Only borrow what you can afford;
  • Set up automatic payments so you don’t miss any repayments;
  • Make sure your contact information, including your email and address, is updated with any companies that you have a loan or credit card with.

Keep an eye on your credit report

Another thing you can do to protect your credit score is to keep an eye on your credit report. 1 in 5 credit reports has some kind of mistake on it. These mistakes can often harm your credit report. 

If you regularly check your credit report, then you might be able to spot a mistake straight away and have it removed from your credit report. The quicker you notice and remove the mistake, the less damage it can do to your credit score and financial wellbeing.

How Long Does Bankruptcy Stay on Your Credit Report?

There are a number of reasons why someone might have to enter into bankruptcy. But how can bankruptcy affect your credit score and how long does bankruptcy stay on your credit report? We’ve put together a helpful guide to give you all the facts.

What is bankruptcy?

Bankruptcy is the legal process when someone is declared unable to repay their debts. The point of bankruptcy is to allow the individual to be released from most of their debts, allowing them to make a fresh start. 

As highlighted by the Australian Financial Security Authority (AFSA): “You can enter into voluntary bankruptcy. To do this you need to complete and submit a Bankruptcy Form. It’s also possible that someone you owe money to (a creditor) can make you bankrupt through a court process. We refer to this as a sequestration order.”

Bankruptcy normally lasts for 3 years and 1 day. However, it is possible to end your bankruptcy earlier if you repay your debts faster.

Different types of bankruptcy

In Australia, if you get into debt and you’re unable to repay it, then there are three formal options available for you – bankruptcy, personal insolvency agreements and debt agreements. We’ve already outlined what bankruptcy is, so let’s cover personal insolvency and debt agreements.

Personal insolvency agreements

A personal insolvency agreement, also known as Part X (10), is a step you can take to avoid declaring bankruptcy. It’s a legally binding agreement between yourself and your creditors and can be used as a way to settle your debts with creditors without going into bankruptcy.

When you enter into a Part X agreement, a trustee will be appointed to manage your finances and make an offer to the creditors you owe money to on your behalf. As part of this agreement, you might have to pay all or part of your debt in either a lump sum or in instalments – depending on what you can afford.

Debt agreements

Debt agreements are similar to personal insolvencies in that it is a way to avoid bankruptcy. Also referred to as a Part IX (9) debt agreement, this type of agreement allows you to reach an arrangement with the creditors you owe money too so you can settle your debts without having to resort to bankruptcy.

Here’s how it works. When you enter into a debt agreement, you’ll be appointed an administrator, who will negotiate with creditors to pay back part of your combined debt. This will be as much as you can afford based on your current financial situation across an agreed period of time. 

When you have completed your debt agreement, then you won’t have to pay back the remaining debt that you owe.

Bankruptcy in Australia

As we highlighted in a previous article, during the 2019 – 2020 financial year, figures from the AFSA highlighted that the number of new personal insolvency agreements, bankruptcies and debt agreements entered was lower year-on-year.

In Australia, you are able to apply for bankruptcy if you meet the following two requirements:

  • You’re unable to pay your debts when they are due (insolvent) and;
  • You’re present in Australia or have a residential or business connection to Australia.

There’s no cost for entering bankruptcy and, according to the AFSA, there’s no minimum or maximum amount of debt or income needed to be eligible.

How does bankruptcy affect your credit score?

A lot of people want to know how bankruptcy affects their credit score. Unfortunately, there’s no precise answer, as the credit bureaus like to keep the exact algorithms they use to calculate your credit score a well-guarded secret.

However, we do know that if you’re declared bankrupt, it won’t be good for your credit score. This is because it sends a clear signal to creditors that you aren’t able to effectively manage your debt. 

Therefore, you can expect that if you go into bankruptcy your credit score will take a significant hit. It will likely take years for your score to recover.

How long does bankruptcy stay on your credit report?

So let’s answer the main question of this article – how long does bankruptcy stay on your credit report?

According to the AFSA, your credit report will show your bankruptcy for either:

2 years from when your bankruptcy ends or;

5 years from the date you became bankrupt (whichever is later).

The AFSA further outlines that bankruptcy will remain on your credit file for a maximum of 5 years if your bankruptcy period lasts for 3 years and 1 day. When you have completed your bankruptcy, the status will change on your report to “discharged”. Although the status will change, the bankruptcy will still remain on your report for a further 2 years.

How to avoid bankruptcy

Now that you have a better idea of the impact of bankruptcy, let’s see how you could avoid filing for bankruptcy in the first place.

Know where you’re at

Before you can take steps to reduce your debt, you need to first know where you’re at. MoneySmart recommends that you make a list of all your debts and show how much each debt is and the minimum monthly repayment if applicable. 

Specifically, the financial education website advises individuals to include credit cards, loan repayments, unpaid bills, fines and any other money you owe. Once you have created the list, add up all the debt that you owe. Once you’ve done this, you’ll have a clearer idea of how much debt you’re in.

Pay what you can

Once you have an idea of how much you owe, the next step is to figure out how much you can repay. You could do this by creating a budget that outlines your monthly expenses, and determine how much money you have leftover after all of your bills are paid. With what’s leftover, you can dedicate some of that to paying your bills. 

Extra tip: reduce your spending

When you take a look at all of your bills, you could try and see what things you could cut. Say you have multiple subscriptions to streaming services, you could reduce that to just one server. Are you eating out a lot? Why not cook at home? There are many things you could do to reduce your spending.

Reduce your debt

When you’re paying back your debts, you could try to reduce your debt at the same time. There are two common methods you could use to achieve this – the avalanche and snowball method.

The snowball system is when you make the minimum payments to all of your debts, except for your smallest, which increases your payments above the minimum requirement. The goal of the snowball system is to pay off your smallest debt as quickly as possible. Once that’s paid off, you move onto the next smallest debt, and so the cycle continues.

The avalanche system has a slightly different approach. Instead of focusing on the smallest debt, you instead focus on the debt with the highest interest rate. Your aim is to dedicate more funds to your debt with the highest interest rate to try and pay it off faster, whilst making the minimum repayments on your other debts.

Once you’ve paid off this debt, then you focus on the next debt that has the highest interest rate. Like the snowball system, you continue with this method until you’ve paid off all of your debt.

Reach out for help when you first notice the problem

To stop your debt from getting out of hand, when you first notice a problem, you should reach out for help. In Australia, you can reach out to a financial counsellor for free, and they can offer you independent and confidential services to help you get back on track.

If you are currently struggling with debt, you can speak with a financial counsellor through the National Debt Hotline on 1800 007 007. Alternatively, you can head to the National Debt Helpline website for more tools and resources.

Check your credit report

Another way you can help avoid having to declare bankruptcy is by frequently checking your credit report to examine your credit history. With Tippla, you can clearly see all of your credit, including your limits, listed on your credit report. This can provide you with an easy overview of your credit situation.

How long does bankruptcy stay on your credit report?

To answer the question of how long does bankruptcy stay on your credit report, the answer is around 5 years if you complete your bankruptcy in the standard 3 years and 1-day timeframe. If you complete your bankruptcy earlier, then it’s 2 years after you’ve finished.

Although bankruptcy won’t stay on your credit report forever, it is worth highlighting that you will be put on the public register called the NPII. Your name will appear on the NPII permanently. It shows details of insolvency proceedings such as bankruptcy in the country.

Why Are My Credit Scores Different? Here Are 3 Reasons

Why Are My Credit Scores Different?

We get asked the question “why are my credit scores different” a lot here at Tippla. There’s a lot of concern that having two different scores is a bad thing, but we’re here to shine a light on why your credit ratings might be different and what it means.

Why Are My Credit Scores Different?

What is a credit score?

A credit score is a numerical representation of your creditworthiness and how reliable of a borrower you are. Your credit score falls on a scale ranging from 0 – 1,200. Your credit score will generally fall on a five-point scale – below average, average, good, very good and excellent. 

The higher your credit score, the better. This is because a high credit score indicates that you are a reliable borrower and likely to repay your debt. This is what credit providers care about the most when reviewing your application – can you pay them back?

In Australia, your credit rating is calculated by three credit reporting agencies – Equifax, Experian and illion. This means you have not one, but three credit scores in Australia. Your credit score is based on your credit report. 

What goes onto your credit report? Here’s a breakdown. Your credit report outlines your credit history, including all of your credit accounts, your repayment history, any credit applications you’ve made recently, and more. 

Sometimes your credit scores and credit reports might be different across the three bureaus. This isn’t necessarily a bad thing. Let’s find out why.

Why are my credit scores different? 

There are three main reasons why your credit scores might be different.

Equifax, Experian and illion use different scales 

As we mentioned above, your credit score is a number ranging from 0 – 1,200. However, they don’t all use the same scale. Your Equifax credit score will be a number falling somewhere between 0 – 1,200. 

The higher your credit rating, the better. Your Experian and illion credit score, however, is based on a scale ranging from 0 – 1,000. Because your Equifax credit score is based on a different scale, then it’s more likely that your Equifax credit score will be different from your Experian and illion credit scores.

In addition, Equifax, Experian and illion all classify your credit scores differently. For example, a good credit score for Equifax is 622 – 725. Anything less than this is either average or below average. Experian, on the other hand, classifies 625 – 699 as a good credit score, and illion categorises a score falling between 700 – 799 as good.

They use different algorithms to calculate your credit score

As Tippla recently covered, the different credit bureaus all use different algorithms to calculate your credit score. Exactly how they do that is a well-kept secret, but we do know a few things. 

Namely, Equifax, Experian and illion all place an emphasis on your repayment history. Do you make your credit repayments on time, have you ever defaulted on a repayment? This is what the credit bureaus particularly look out for. 

Other things the credit bureaus look out for are:

  • How many credit accounts you have;
  • How many credit applications you’ve made in the past five years;
  • Court judgements;
  • Bankruptcies;
  • Serious credit infringements.

The credit bureaus determine what counts the most towards your score, and how much weight each of these items have. This is why you might have a different score across the three bureaus.

Not all lenders and banks report to all credit bureaus

Your credit score is based on your credit history outlined in your credit reports with the three reporting agencies. Each month, credit providers such as banks, lenders and utility providers, report to the credit reporting agencies. However, they don’t necessarily report to each one. 

Say you have a credit card with a bank. Each month that bank might only send information on your repayment and credit activity for the month to Equifax and not the other two bureaus. Therefore, when Equifax is calculating your score, it is considering all of the information provided to it by your bank, alongside any other information it might get from other companies you have credit accounts with. 

However, because Experian and illion aren’t getting this information each month, it isn’t being factored into your score. If you have good credit behaviour, then this might not be contributing to all your credit scores. On the other side, if you have a bad credit history, it might not affect all your credit scores.

Did you know: sometimes you might only have one or two credit scores

If you have a credit history, then you’ll likely have three separate credit scores with each of the credit reporting agencies. However, this isn’t always the case. If you only have one type of credit or minimal credit activity, then you might actually not have a credit score with all three. 

Think of it like this. Let’s go back to the same situation as earlier – you have a credit card with a bank. That bank only reports your credit information to Equifax. That means Experian and illion aren’t getting that credit information. 

Now, say that’s the only credit you have – you’ve never taken out a loan, and you don’t have any utilities in your name. Besides this credit card, you don’t have any credit information, and Experian and illion aren’t getting that information. To these two credit reporting agencies – you don’t have any credit history. 

Your credit report would be blank and, therefore, you don’t have a credit score. This is why sometimes you can have a credit score with one of the reporting agencies, but not with all three.

Why are my credit scores different?

To sum this up, there are three main reasons why your credit score might be different across Equifax, Experian and illion. These are:

  1. Equifax uses a different scale than Experian and illion;
  2. They all use different algorithms to calculate your score;
  3. Not all credit providers report your information to all three credit reporting agencies.

Whilst these are the three main reasons why your credit scores are different across the three agencies, that doesn’t mean they are the only reason. Another reason, and one you should really look out for, is mistakes on your credit report. 

1 in 5 credit reports has some kind of mistake on them. This could include the wrong address, incorrect or outdated personal information, or sometimes it could be a larger mistake such as a credit account that you don’t actually have. Mistakes can harm your credit score, so it’s important to check your report frequently to make sure all of the information is up to date and correct.

How Are Credit Scores Calculated in Australia?

how are credit scores calculated

There’s a lot of uncertainty when it comes to credit scores. There’s one question, in particular, that has a lot of mystery surrounding it – how are credit scores calculated in Australia? We’re here to pull back the curtain and give you all the information you need.

how are credit scores calculated

Credit scores in Australia

Before diving into how your credit scores are calculated, you must understand what your credit score is. In Australia, three credit bureaus calculate your credit score – Equifax, Experian and illion. Your credit score sits somewhere on a scale ranging from 0 to 1,200. The higher your score, the better.

Your credit score is a number that represents how trustworthy of a borrower you are – i.e. how likely you are to make your repayments if you take on some kind of credit. There are many things that constitute as credit. 

Examples of credit

The following are examples of different types of credit in Australia:

  • Credit card;
  • Loans – personal loans (secured and unsecured), car loans, home loans (mortgage), business loans, student loans and more;
  • Buy Now Pay Later services;
  • Mobile phone;
  • Internet;
  • Electricity or gas;
  • Water.

Your credit score is based on many factors. These include your credit history – do you always make your repayments on time, have you applied for credit recently, and if so, how many applications did you make? Other factors include more serious credit infringements – have you gone through bankruptcy, have you entered into default?

What is a good credit score?

Your credit score generally falls on a five-point scale – below average, average, good, very good and excellent. The higher your credit rating, the better it is. Not only does having a good credit score feel nice, but it could also unlock many financial benefits for you. 

These include lower interest rates when you take on some kind of credit, a larger variety of credit options, and better terms. All of these benefits could save you money, and all it takes is a good, or even excellent credit score.

So what is a good credit score? A good credit score differs between each of the bureaus. Here’s how Experian and Equifax categorise credit scores in Australia.

Equifax and Experian credit scores

Source: Equifax and Experian

Understanding the difference between your credit score and credit report

What is the difference between your credit score and credit report? Simply put – your credit score is a number, ranging from 1 to 4 digits. This number gives lenders and credit providers insight into how reliable of a borrower you are. 

Your credit report is also referred to as a credit file, however, is what determines your credit score. Your credit report contains detailed information on your credit history. It outlines your credit accounts, credit enquiries (otherwise referred to as credit applications), defaults, judgements and details your credit history. 

If the information contained within your credit report demonstrates good credit behaviour, then you’re likely to have a credit score falling somewhere between good to excellent. If your credit report shows too many credit applications, defaults and serious credit infringements, then you’re likely to have a score ranging from below average to average.

Here’s an overview of what goes on your credit report and how long it stays there:

Activity Average length on your credit report
Credit Accounts Any open credit accounts and accounts that have been closed in the past two years will appear on your credit report.
Credit Enquiries Any application you have made for some type of credit, whether it be a loan or credit card, will appear on your credit report for 5 years. It will appear on your report regardless of whether you went ahead with the credit, and if you were approved or rejected.
Repayment History Your repayment history over the past 2 years will appear on your credit report.
Defaults Your credit report will show if you have defaulted on any repayments in the last 5 years.
Court Judgements Same with defaults, if you have received any court judgements in the last 5 years, then it will appear on your account.
Bankruptcies If you enter into bankruptcy, it will remain on your report for 5 years.
Serious Credit Infringements Any serious credit infringements will stay on your report for up to 7 years.

How does Equifax calculate my credit score?

Credit bureaus like to keep the exact algorithm they use to calculate your credit score close to their chest. Nonetheless, they have revealed certain information about how they calculate your credit score.

According to Equifax, the general factors considered in 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.

Equifax has also outlined the below information as its standard Credit Score model used in its assessment. Of course, this is only a general overview and it is subject to change. Nonetheless, it provides a good picture of what the credit bureau deems as the most important.

how equifax calculates credit scores

How does Experian calculate my credit score?

Now you have a better understanding of how Equifax calculates your credit score, let’s take a look at how Experian calculates your credit score. As highlighted by the bureau itself: “Your Experian Credit Score is calculated applying a statistical algorithm that uses past events to predict future behaviour. Each credit bureau uses a slightly different algorithm and does not disclose in detail how this is calculated.”

Experian does go on to outline some key attributes that are used to generate your credit score. This includes:

  • 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.

Whilst we don’t know how much each of these items weighs when it comes to calculating your score, you can assume that the above factors will have some influence on your rating. Therefore, if you want to have a good credit score or higher, then you could ensure that you employ positive credit behaviour regarding the above items.

How does illion calculate my credit score?

Last but not least, let’s take a look at how illion calculates your credit score. On its website, illion says that it determines your credit rating by looking at whether you’re reliable with paying your bills. 

Furthermore, the credit reporting agency also outlines that the following events could harm your credit score:

  • Not paying your bills on time, or failing to pay them at all;
  • Applying for credit too often;
  • If someone else defaults on a joint debt.

With this in mind, we can assume that paying your bills on time and spacing out your credit applications could have a positive impact on your credit score.

Credit score calculator

Unfortunately, there’s no such thing as a credit score calculator. However, there are several ways you can check your credit rating. If you’re just wanting to know your credit score, then there are many free online sites you can use. Similar to Tippla, you can sign up in minutes, and you’ll usually need to provide some kind of identification, like your driver’s licence.

However, if you also want to see your credit report, where all the important information is, then some of the online sites won’t be able to help you. This is where Tippla can help! 

With Tippla, not only can you check your credit score, but you can also see your full credit report for both Equifax and Experian. This provides you with a more thorough overview of your credit situation. The sign-up process takes just minutes and it is completely free.

Alternatively, you can get your report directly from each of the credit bureaus. However, you will have to wait 10 days to get your report. If you want your credit report within 10 days, then you might have to pay for it. You might also incur a fee if you ask for a copy of your credit report more than once a year.

How to improve my credit score

There are many ways you can improve your credit score. We recently put together a helpful guide on how to improve your credit score. Here’s a breakdown:

Space out your credit applications

One way you can improve your credit score, or at least, limit the damage to your credit score, is by spacing out your credit applications. When you apply for any type of credit, the lender will look at your credit report. This registers as a hard enquiry on your report and harms your credit score for a time. 

The more applications you make in a short period, the more damage it will do. If you space out your credit applications, then you can limit the damage to your credit score. Not only that but multiple applications in quick succession can indicate to lenders and credit providers viewing your report that you are in financial distress. Regardless of whether this is the case or not, it could lead to you being rejected for a loan.

Make your repayments on time

As outlined by the three credit bureaus, your repayment history is factored into your credit score. For some, it is the most important ingredient. That’s why ensuring that you make your repayments on time is important if you want to have a good credit score.

Keep your credit accounts open

Whilst having too many lines of credit open can be bad for your credit score, it can also be good to keep your credit accounts open, even if you’re not using them. Confused? It does sound contradictory. Here’s how it works. 

The age of your credit account matters, and it can contribute positively to your credit score. The older the account, the better it is for your rating. That’s because it demonstrates that you can consistently handle a line of credit.

Check your credit report frequently

If you want to stay on top of your credit score, then it’s a good idea to check your credit report frequently. Your report can change often, sometimes even multiple times a day. You can never be too careful. 

If you become familiar with your report and score, then you can see if it drops or increases. Then you can take a look at your report and see what’s changed. This can give you a good insight into what’s good and bad for your score. 

Keep an eye out for mistakes on your credit report

1 in 5 credit reports will contain some kind of mistake on them. Not only can mistakes harm your credit score, but they could also be an indicator that you’ve been subject to credit card fraud. That’s why it’s important to check your report and score often.

How Are Credit Scores Calculated in Australia?

Unfortunately, there is no clear answer to the question “how are credit scores calculated in Australia”. This is because the credit bureaus won’t reveal their exact formula for calculating credit scores. Nonetheless, if you do these following things, then it could be the difference between having a good and bad credit score:

  • Make your repayments on time;
  • Pay your bills;
  • Don’t make too many credit applications in a short period;
  • Check your credit report frequently;
  • Don’t take on too much credit.

Want to know more about your credit score? Head to Tippla’s blog where you can find many informative articles and guides on your credit score. If you want to view your free credit report, you can sign up to Tippla and have your credit score and report within minutes.

How To Reduce The Interest On Your Personal Loan

how to reduce the interest on your personal loan

A lot of people don’t realise just how much interest can cost you when you take out a personal loan. That’s why we’ve put together this helpful guide on how to reduce the interest on your personal loan.

how to reduce the interest on your personal loan

The average personal loan in Australia

A lot of Aussies rely on personal loans. According to data from the Reserve Bank of Australia (RBA), the total amount of outstanding personal loans in Australia was more than $145.5 billion as of September 2020.

The RBA also reports that the average variable interest rate for a personal loan is 14.41% and 12.42% for a fixed personal loan.

In ustralia, there are two main types of personal loans – secured personal loans and unsecured personal loans.

How to reduce interest on personal loans

There is a range of different personal loans available in Australia – short-term, long-term, secured, unsecured, fixed-rate and variable rate – the list goes on and on. 

Tippla recently put together a guide on how to reduce the interest on home loans. As was the case with home loans, if you want to reduce the interest on your personal loan, then you could compare all of the different options available to you. MoneySmart recommends comparing these features:

Comparison rate
  • a single figure of the cost of the loan – includes the interest rate and most fees
  • make sure you’re comparing the same loan amount and term
Interest rate
  • the rate of interest you’ll pay on the amount borrowed
Application fee
  • the fee when you apply for a loan
Other fees
  • the monthly service fee
  • the default fee or missed payment fee
  • any other fees — read the terms and conditions to find these
Extra repayments
  • whether you can make extra repayments without paying a fee
Loan use
  • some loans can only be used for specific things like buying a car or home renovations
  • make sure you can use the loan for what you need
Loan term
  • shorter terms often have lower interest rates
  • longer terms usually mean lower repayments, but you’ll end up paying more interest

Source: MoneySmart

In Australia, you can also get a low-interest loan and a no-interest loan. They can also come with no fees and fast approval. 

Pay off your personal loan quickly

When you take out your personal loan, you will be charged a set amount of interest each month which will be factored into your repayment amount. Therefore, the quicker you pay off the loan, the less interest you will pay. Say you get charged 14% interest each month for a 6-month short-term loan, and your repayments are $100, you’re paying an extra $14 each month. 

Now say, you pay off your loan in 4 months instead of 6, you’ve saved yourself $28. Now imagine this on a larger scale, and you could really save yourself a lot of money.

We’ve put together a number of ways you could pay off your personal loan faster.

Round up your repayments

A simple way you could repay your loan faster and save yourself from having to pay all of the interest is by rounding up your repayments. Say your monthly loan repayment is $235 a month. If you instead repaid $250 a month, then you’ll reach the end of your loan faster. Depending on the loan term, you could be saving yourself months worth of interest by doing this.

Before you start making these extra repayments, check if there’s an early exit fee or any other fees that you might be charged.

Pay fortnightly, instead of monthly

Similar to rounding up your repayments, if you change the schedule of how you repay your loan, you could save yourself in interest. But how does switching your repayments to fortnightly from monthly make a difference?

Let’s say your loan repayment is $200 a month, over a 2-year period. Instead of paying that amount each month, you could pay $100 each fortnight. This way, you’ll end up paying more in the long run, as there are 26 fortnights each year (you’ll pay $2,600 instead of $2,400). This way, you could repay your loan months ahead of schedule, and save on interest.

Make additional repayments

Another way you could repay your loan faster is by making additional repayments when you can. By doing this, you could keep to your normal repayment schedule, but make impromptu repayments as and when you can afford them. The amount is up to you – any additional repayments will bring the end of your loan quicker, and that could save you a lot in interest.

Long-term loans aren’t always best

A lot of people might be tempted into getting longer-term loans with lower interest rates, thinking it will save them more money in the long run. However, this isn’t always the case. 

As an example, say you borrow $1,000. If you take out a short-term loan with a 3-month repayment period and a 14% interest rate. Throughout the loan, you’ve paid $420 in interest.

On the other side, imagine you take out a longer-term loan of the same amount, with a 2% interest rate over 2 years. That 2% interest rate is dramatically smaller than 14%. However, over the 2 years, you’ll end up paying $480 worth of interest, which is $60 more than the higher-interest short-term loan.

Refinance your personal loan

If you’re trying to reduce the interest rate on your personal loan, there is also the option of refinancing your personal loan. This is when you take on a new loan to pay off your existing one. There are a number of reasons why people decide to refinance their loans:

  • To get a lower interest rate;
  • To get a shorter, or longer loan term;
  • To consolidate their debt.

Why refinance your personal loan?

When you refinance your loan, you might be able to get a better deal than your existing one. This is especially true if your credit score has improved since you took out the initial loan. Generally speaking, the better your credit score, the better the interest rates and conditions available to you will be. Therefore, if your score has improved, then you might be able to get access to better deals compared to your initial loan term and that could save you. 

Debt consolidation

Refinancing your personal loan could allow you to consolidate your debt. If you have debt from multiple sources, such as numerous personal loans, then you might be able to combine this into one debt consolidation loan. A debt consolidation loan combines all your current debts into one single debt with one interest rate and one repayment date. 

The benefits of doing this include ease. You will only have to worry about one loan. That means one loan, one interest rate and one repayment schedule. By going down this road you might be able to get a better interest rate overall and save money.

However, there are some things to consider. You’re not guaranteed a lower interest rate when you take on a debt consolidation loan. In some instances, consolidating your debt could mean that you are paying higher interest rates, which means you’ll end up paying more in the long-term. 

On top of this, you might be charged extra fees by your provider, such as establishment fees, fees for paying off your other debt early, etc. These extra fees could outweigh the benefits of the lower interest rate. That’s why it’s a good idea to carefully weigh up your options and read the terms and conditions.

Access to more finance

If you refinance your loan, you might be able to get access to a higher credit limit. This could be good if you’re in need of extra finance. Perhaps your situation has changed, your family has expanded – the list goes on and on. 

Refinancing your loan could be an easy way to accommodate this. However, taking on a higher credit limit means you’ll have more to repay. It’s important to ensure you can make the repayments before taking on a higher limit.

Credit cards in Australia

As Tippla recently covered, a lot of Aussies have credit cards. There were 13,668,490 credit cards in circulation as of November 2020, according to Finder. Credit cards are similar to personal loans – they are a line of credit that you have to repay. Like personal loans, they often come with interest and extra fees.

How to reduce the interest on your credit card

There are several ways you could reduce the interest on your credit card. For example, you could opt for a low-interest credit card.

Another thing you could do is pay off your credit card each month in full. With credit cards, you don’t have to repay everything that you spend each month. Most credit cards come with a minimum monthly repayment. 

This is the minimum amount you have to pay each month to meet your credit agreement and avoid late fees. This is usually around 2 or 3% of the total amount you owe for the month.

However, as we explained in our previous article when you only repay the minimum amount, your remaining balance is charged interest. Head to our article to see why doing this can quickly increase your credit card debt.

With this in mind, to avoid paying extra interest, you could pay off your credit card in full each month. To achieve this, you could set up a budget and be careful with the purchases made on your credit card. You could try to only spend what you’re sure you can afford to repay each month.

How to reduce the interest on your personal loan

There are a number of ways to reduce the interest on your personal loan. These include:

  • Comparing multiple loans to get the best deal;
  • Paying off your loan quickly;
  • Opting for loans with shorter terms;
  • Refinancing your loan.

If you’re unsure of what’s the best option for you, you can reach out to a free financial counsellor. They can explain your options and help you make the best decision for you.