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Getting to know your credit score

Having good credit can be an invaluable asset if you’re on the hunt for finance. The ability to borrow money opens up many opportunities, and with a good credit score, you will be able to borrow larger amounts and gain access to lower interest rates.

On the flip side, credit debt – whether it’s through credit cards, other loans, etc. – can quickly escalate out of control. The pitfalls of abusing credit can lead to long-term financial disaster if you’re not careful.

It’s a lot easier to maintain a good credit score than it is to repair one. So, start as you mean to go on and then maintain that excellent credit rating. Not sure how you can possibly do that? No problem! We’ve covered everything you possibly need to know here in this article.

Do I have a good or bad credit score?

Before we get into it, how do you even know if you have good credit or not? In order to understand how good or bad your credit score is, it helps to understand how credit scores are calculated here in Australia.

Basically, scores range from 0-1,200 depending on the agency, with the highest number being the very best. A score under 549 is generally considered “bad” or in serious need of work. If you fall into this category, don’t fret — there are things you can do to improve that score and be on your way to financial freedom in no time.

Why do I have a poor score?

Figuring this out can be tricky, as your credit score depends on a number of factors. To figure out what things are currently wreaking havoc on your score, look at your credit accounts and how much debt you’re currently managing. Are you over-utilising the credit that you have? Using significantly more than 30% of your available credit is not wise. Bringing down that credit-to-debt utilisation will make a huge difference in your score whether you realise it or not.

For sure, overdue bills make an impact, especially anything overdue by more than 60 days that’s over $150. Applying for multiple lines of new credit in a short period can also appear desperate to creditors and will cause problems. It’s important to make sure that you are making at least minimum payments on all of your outstanding debt. Any progress is better than no progress at all.

Simple steps to improve your credit score

Taking a good look at the way you’ve been doing things means taking responsibility for any of the mistakes you’ve made. It also means you may find you’ve been doing some things correctly.

For one – having several kinds of credit is always a good thing. In repairing your credit, you should always consider the types of credit you already have. If you have a car loan, a home loan, and a few credit card balances, for example, this shows creditors diversity on your part. Having a few older accounts is also very good, so don’t close inactive accounts where possible.

Ultimately, credit is not a simple thing, and repairing it takes time. The good news is that there is hope, here are some steps you can take to get started:

1. Pay off your current credit debts

The first thing you can do to raise your credit score is to pay off current credit balances before acquiring new debt.

In particular, we’re talking about credit cards here. The worst way to pay back a credit card debt is by paying the minimum payment each month. This can double, triple, or even quadruple the amount that you have to pay back. The interest on your balance will grow over time and you’ll get almost nowhere in repaying the debt. This is the biggest trap people fall into by using credit cards too often for unnecessary purchases.

If you have a current overdue balance on a credit card that you can pay down, pay it as quickly as you can before applying for new debt.

2. Paying on time

Faithfully paying your monthly balance on your credit debts is the best way to secure a good credit score. When a payment or two is missed or late payments occur, your credit score suffers badly.

It is especially important never to let a payment be overdue for more than 60 days if the payment is for more than $150.

Be prepared to make your payments a few days before the actual due date. That way, even if there is a delay in transferring funds, like an internet problem or some unforeseen circumstance, it’s much less likely to cause a problem.

It is much safer and much cheaper overall to remain completely within the due date range by paying a few days early, routinely, so your credit score never suffers.

3. Finding the best interest rate

In terms of credit cards, in Australia applying for a lower interest debt so that you can switch your balance over will not affect your credit score. It’s sound financial practice to utilise a credit card that offers a very low interest rate for a fixed period.

But do so with care, and do not simply apply for new cards that are not necessary. Credit cards can be easily over-used, and before you know it you may inadvertently rack up thousands of dollars in “small balances” on various cards, and you may get in over your head very quickly.

So, it’s super important to be aware of the pitfalls and dangers of applying for too many cards. A better strategy is to maintain one or two credit cards and keep the balances paid off and paid on time, every month.

4. Credit can be diversified to your advantage

If you carry a mortgage, and the payments are affordable, that is a good foundation for building credit. Be careful when diversifying into other forms of credit and keep your debt-to-credit ratio within an acceptable range.

If you build a good working relationship with your primary financial institution, your advisor can help structure how your credit is laid out and help to plan repayments on an affordable schedule.

Ensuring your payments are always on time and making more than the minimum required payments will guarantee your credit score works to your advantage and not against you.

How long does it take to repair your credit?

Australian credit reporting agencies

A good place to start with credit repair is by getting a copy of your credit report. In Australia, the main credit reporting agencies are:

1. Illion (formerly Dun and Bradstreet Australia)
2. Equifax (previously known as Veda)
3. Experian

You can request a copy of your report each year from any of these agencies. There is a good chance that there will be a mistake on your report that you can report to the creditor, to the credit reporting body, or the Privacy Commissioner if needed. So make sure all your information is correct – there’s nothing worse than paying the price for something that’s not even true!

Also, ensure that you are paying all of your bills on time, and try not to take on any additional debt at all. Begin by paying off the highest interest cards and bills and, if you are able to, switch to lower interest cards and services.

By lowering the total amount of debt you owe, you are well on your way to a better score. Even the smallest things like setting up automatic bill payments can help you to catch up and keep you out of debt in a relatively short period.

Expect improvements in 12-18 months

Depending on your initial score, you could start to see improvement in as little as 12-18 months if you are using your credit wisely. This means you should definitely keep track of your monthly habits and address the problems you have using credit.

It is always a wise idea to add positive credit to your reports every month by paying on time and keeping your utilisation down. The lower your score is, the longer it will take to improve. It may take several years to improve a very low score. So, don’t waste time!

Bring a sense of urgency and energy to your mission to improve your score, by thinking long term. A good credit score is always a product of responsible and intentional habits.

Establishing a credit score from scratch

The best strategy to begin establishing a good credit score is to start with one credit card or a small loan and build up a history of regular, on-time payments.

If your first credit card has a $1,000 limit, don’t use the entire amount. Keep the balance low. Pay off the first $500 before you rack up another $500. This way, your credit score will show positive movement because you have proven you are trustworthy. That means a lot when applying for other credit cards, lines of credit, or even a mortgage down the road.

Be cautious when your bank offers to raise your credit limit because you have proven yourself a good customer. Keep your credit card balances as low as possible, even when you accept a higher limit.

How do credit changes affect a score?

Australia’s credit reporting system has recently seen an overhaul, with the brunt of the changes only just coming into effect. These changes mean that almost everyone’s credit score will have recently changed.

Before 2014, credit reporting institutions only shared negative details about your financial history. This included things like bankruptcies, defaults, late repayments, and credit card applications were shared between institutions.

Since 2014, the reporting of positive credit events has been in practice. As it wasn’t a legal requirement, most big banks didn’t report positive credit events. Now this is being enforced, so all credit reporting institutions will also have information on the positive credit transactions you have made. Good, regular payment histories, the types of credit you have, and repayments made are all being shared. This should mean that your credit score will more accurately reflect your relationship with credit.

Some people will see their credit rating improve automatically as the increased amount of data demonstrates that they are good credit risks. In turn, they will be offered better interest rates.

Other people may see their credit rating decline because of the change. However, there is no doubt that better information being shared about negative credit transactions will lead to more accurate credit scores.

As more information will be shared, there will be more detail on your credit report. If you notice an error in your credit report, it pays to get the error fixed as soon as possible.

How to report and fix an error

Your credit report contains a lot of information about you and your financial status. It pays to ensure that the information within it is correct. The better your credit score, the more credit you can get and the lower interest rates will be. Follow the steps below and within a matter of months your credit score could have improved dramatically.

Option 1: Report it

If you notice an error in the credit report from any of the three credit reporting agencies, the first thing to do is to contact the credit reporting agency directly. They will investigate whether there is an error on your credit report by discussing it with the relevant institution. If an error is confirmed, your credit report will be corrected and information will be updated free of charge.

Option 2: Talk with your lender

If the investigation finds that there is no error in your report, the next step will be to talk directly with the credit provider who reported the error. Explain to them the listing is incorrect. If they still dispute the issue then they must provide you with information on why the credit report is accurate. They must also supply you with evidence supporting this claim.

Option 3: Independent dispute resolution

If you still disagree, you can dispute the credit report through an independent dispute resolution. Who to turn to depends on the type of credit being disputed. For example, the Financial Ombudsman Service typically handles issues with credit cards and loans, whereas the Energy and Water Ombudsman will handle issues arising from utility bills.

Option 4: Office of the Australian Information Commissioner

The final place that you can turn to is the Office of the Australian Information Commissioner (OAIC). You must have previously attempted to resolve the matter through the above steps before the OIAC will hear your complaint.

Get on top of your credit, with Tippla

For no cost whatsoever, you can utilise Tippla’s smart monitoring and tracking to gain a new perspective on your credit score. By comparing your score from Experian and Equifax, we’ll help you understand it more deeply so you can get back on track financially.

For smarter credit checks, choose Tippla.

While we at Tippla will always do our best to provide you with the information you need to financially thrive, it’s important to note that we’re not debt counsellors, nor do we provide financial advice. Be sure to speak to your financial services professional before making any decisions.

No clue about credit enquiries? Join the club

If you’re wondering why credit checks lower a credit score, you’re not alone. Nearly two-thirds of Aussies don’t even know their credit score and 1 in 7 Aussies are too scared to check. New research also suggests that 50% of Aussies surveyed don’t know how and where to check their credit score. So, it’s fair to say a lot of us are at a bit of a loss. There is a large gap between what a credit score really is, and the public perception of what having a credit check does and does not mean. So, how do we close the gap?

The best place to start when fighting misconceptions, is with the facts! So, we’ve answered a few common questions to help you get acquainted with your credit score and why having a credit check might lower your credit score.

Does checking your credit score hurt your file?

No! Checking your credit score does not damage your credit file. Surprised? You’re not the only one. It’s a common myth, as 19% of Aussies believe that checking on their credit score will hurt their file. As an individual checking your credit score, you can breathe a sigh of relief – you’re in the clear. Not only is your credit score safe, but so is your wallet, as most basic credit checks come free of charge.

If third-parties, such as lenders, conduct check credits the story can be a little different.  Lenders conducting credit checks could mark your file with a hard enquiry, leaving a minor impact on your credit file. 

What is a credit score made up of?

Several factors make up your credit score, each weighted differently depending on their significance. The next step in getting to know your credit score is uncovering what makes it tick. The key to maintaining a healthy credit score is understanding how different financial decisions impact your score. Take a look at the 5 factors that affect your credit score:

Bill payment history

Weighing in at number 1 is bill payment history. The quality of your payment history determines 35% of your credit score. So, what does it mean to have a pristine payment history? Mostly, it’s the little stuff. Such as paying bills on time and making timely repayments on credit cards and loans. The biggest favour you can do your credit score is making your payments on time each month. It’s a win-win – avoid nasty late fees and keep your credit score fresh! Your future self will probably thank you.

Amount of debt

Debt level attributes to 30% of your credit score. Credit score agencies, such as Equifax and Experian, analyse particular factors of your debt to calculate your credit score. These include, but are not limited to, your total debt amount, the ratio of credit card balances to your credit limit (also known as credit utilisation) and the correlation of a loan balance to the original loan amount. 

As a general rule, it’s good practice to maintain credit utilisation at 30% or less. In other words, only charge up to 30% of any available credit on your card. Much like bill payment history, losing control of debt can significantly damage your credit score. The good news? It works both ways. If you work to pay off your debt, you can drastically improve the health of your score. What a bonus!

The age of your credit history

When it comes to credit checks, age matters. The age of your credit history accounts for 15% of your credit score. Age demonstrates experience. Therefore, the older your credit history, the stronger your credit score. Don’t shy away from the odd wrinkle or frown line, as it highlights how you handle credit. Opening and closing accounts can alter your average credit age, so keep accounts open, even if you no longer use them – provided they’re paid for, of course.

Diversity of history

Age without diversity holds little purpose. So, while your credit history ages, it’s important to remember to diversify your credit. Your credit history should show two basic types of credit accounts: revolving accounts and instalment loans. A revolving account is an account that can incur debt where the borrower is not obligated to repay the outstanding balance each month. An instalment loan is a loan that you must repay over a set period, such as a car loan or mortgage.

To really hit peak diversity on your credit file, you could take out different loans for a variety of assets, such as a car or a home, as well as credit cards and personal loans. Credit diversity only accounts for 10% of your score, so it’s more beneficial to focus on bill payments and to repay lingering debt.

Number of credit inquiries 

Credit enquiries make up 10% of your credit score. Conducting your own credit check won’t reflect negatively on your credit score. However, if you submit a loan application, you will incur an enquiry on your credit report. This enquiry simply demonstrates that you’ve made a credit-based application.

The average Australian will typically have a few credit enquiries on their report – it’s expected, especially given how we all shop around to find the best possible rates and offers. However, several enquiries, especially during a short period, will negatively impact the health of your score. So, keep that in mind when you’re looking to borrow money, or take out a new credit card.

Hard enquiries vs soft enquiries

Your credit score contains a variety of intricacies and different types of enquiries have varying levels of impact. Credit enquiries are classified into two categories; hard enquiries and soft enquiries. The critical difference is that a soft enquiry does not negatively affect your credit score health; however, a hard enquiry certainly will. For example, if you decide to take out a personal loan the lender will conduct a credit check, leaving a hard enquiry on your credit report. 

As an individual, you may not be penalised for conducting your own ‘credit check’. Submitting a request to review your credit score registers as a soft enquiry and has no effect on your score. Soft enquiries are only visible to you on your personal credit report. It’s perfectly normal to see several soft enquiries on your credit report. In fact, it’s good to become familiar with the notes on your report so you can see what does and doesn’t affect your credit score.

When we venture into hard enquiries, things become a little more grey. A hard enquiry will occur when you authorise a third-party, such as a lender or credit card issuer, to review your credit report. The penalty for a hard enquiry varies, however, according to FICO you may only incur a 5 to 10 point drop per enquiry. Even though hard enquiries are pinned to your credit report for 2 years, they may only impact your score for a few months. 

Examples of hard vs soft enquiries

The essential difference between a hard and soft enquiry lies in whether you give the lender permission to check your credit. To help you identify hard and soft enquiries on your credit report, here are a few examples.

Common hard enquiries

• Mortgage applications
• Car loan applications
• Credit card applications
• Student loan applications
• Personal loan applications
• Apartment rental applications

Common soft enquiries

• Checking your credit score with Tippla!
• ‘Pre-qualified’ credit card offers
• ‘Pre-qualified’ insurance quotes
• Employment verification (e.g. background check)

Other types of credit checks may be classified as either a hard or soft enquiry, including an insurance company enquiry, or a credit check conducted by your cable or internet providers.

How to minimise the impact of hard enquiries

Borrowing money for that first family home, or your dream car is a part of life. Don’t shy away from applying for finance you need just to avoid a hard enquiry on your credit report. There are a few ways you could minimise the impact of hard enquiries. 

Firstly, don’t let the fear of a hard enquiry stop you from browsing interest rates when shopping for a home or car loan. Some credit score providers, such as FICO, allow for a 30-day cooling-off period before specific loan enquiries are reflected on your credit score. Credit providers may also combine similar loan enquiries into a single enquiry on your credit report. This will lessen its effect on your score, as long as they were made within a certain window. 

So, when hunting down the best loan, don’t settle for the first one you see. Set a designated window to shop without the worry of it severely affecting your credit score.

What is a bad credit score?

A credit score demonstrates to lenders your ability to repay your loan and can also reveal the likelihood of incurring an adverse event in the following months. A bad credit score is typically anything below 509. 

An Equifax or Experian score is the most common way to measure your credit score. The score ranges from 0 to 1200, 0 being the worst and 1200 is perfect. So, you’ve requested your credit score, and now you have your number, but what does it actually mean? Good question. Below is a handy breakdown of what your score indicates:

Score	What it means
Below average to average (0-509)	It’s more likely that you may incur an adverse event, such as a default, bankruptcy or court judgement in the following 12 months
Average (510-621)	You may likely incur an adverse event, such as a default, bankruptcy or court judgement in the following 12 months
Good (622-725)	It’s less likely that you may incur an adverse event that could damage your credit file in the following 12 months
Very good (726-832)	It’s unlikely that you may incur an adverse event that could damage your credit file in the following 12 months
Excellent (833-1200)	It’s highly unlikely that you could incur an adverse event that could damage your credit file in the following 12 months

Can I check my credit score for free?

By jumping online and submitting a few details, you can generally check your credit score for free. There is a myriad of sites that will deliver a bog-standard credit score calculation from a single credit reporting agency.

Credit scores are vital for understanding your overall financial health and assessing your suitability for credit approval. So, we think you deserve the big picture, not just a single frame. We believe it’s time you meet Tippla.

Meet Tippla

Do you want to check, monitor and improve your credit score? What if we said it didn’t have to cost you anything? That’s what you get when you sign up to Tippla!

Subscribe to Tippla for intelligent monitoring and tracking of your credit score and watch it grow with smart analysis and insights. Gain a deeper understanding of your credit score by comparing your score from multiple credit reporting agencies. 

Tippla – for smarter credit checks

 

Disclaimer: At Tippla, we’ll always do our best to provide you with the information you need to thrive financially, we’re not debt counsellors, nor do we provide financial advice. Be sure to speak to your financial services professional before making any decisions.

What does my Equifax score mean?

Ah, your Equifax credit score. It’s the small, three or four-digit number that often stands between you and your financial freedom. Maintain a good score and it’ll make life a hell of a lot easier when you need to get approved for a loan. Let your credit slip though, and it can leave you momentarily hamstrung – unable to access the money you need or forcing you to lean on more expensive (often less trustworthy) lenders.

Why your credit score matters

If you’ve ever applied for a credit card, a personal loan or a home loan, you probably already know just how vital your credit score is. Yet, despite its importance, most of us know more about how our Uber rating works than our credit rating – especially when it comes to how the number is calculated.

If you’re reading this, then chances are that’s why you’re here.

Equifax is one of the three major credit reporting agencies in Australia. That means, they’re more than likely the guys behind your credit score. How did they calculate it? What does it mean? How can you change it? These are the questions we’re here to answer.
So let’s take a look at all there is to know about your Equifax score, and how you can ensure it works for you, not against you.

Equifax credit scores 101

Equifax (formerly known as Veda) is one of the largest consumer credit reporting agencies in the world, and by far the largest in Australia. So, if the name sounds familiar – that’s probably why!

An Equifax Score is given on a scale of 0 to 1200, 0 being the worst and 1200 being the best. In a nutshell, credit scores are designed to neatly summarise your financial responsibility in a single number. Agencies like Equifax analyse your financial history and use this data to assign you a number that reflects just how good you are at managing your money. Your score is meant to indicate your risk level to lenders and predict the likelihood of you keeping up with repayments on a new credit card or loan.

Of course, your Equifax Score isn’t the only factor banks and lenders might take into consideration when reviewing your finance application. It just happens to be a very important piece of a much larger puzzle.

Key contributing factors

So, what actually contributes to your final credit score? While the actual mathematics are too complicated to get into here, let’s look at a typical breakdown of the different things Equifax takes into account.

Bill payment history (35%)

The single most important factor in the calculation of your credit score is your bill payment history. It accounts for a little over a third of your final figure, so timely payments are crucial here. If you’re always late to make your repayments on a credit card or a loan, this will definitely bring your credit score down. More serious issues like charge-offs, debt collections, repossessions, tax liens, foreclosures or bankruptcy can be even more disastrous. So, it’s important to stay vigilant!

Level of debt (30%)

The second most important factor is your level of debt. Equifax will take into account the overall amount of debt you have, your ‘credit utilisation’ (the ratio of credit card balances to credit card limits), and the ratio of your loan balances to the original loan amounts. In other words – how much you’re borrowing and how quickly you’re paying it off. To score well you should aim to pay down your debts as quickly as possible and work to keep your credit utilisation as low as possible (ideally under 30%).

Age of credit (15%)

Here, Equifax will ask questions like – how old is your oldest credit account? And, what is the average age of all your credit accounts? The answers to these will offer insights into how experienced you are at handling your debts. A long-held account may suggest reliability, especially if repayments have been regularly met over time. All banks and lenders will be looking for this trait in their prospective borrowers.

Mix of credit (10%)

The greater the mix of credit on your credit report, the better it is for your score. It’s good to show experience in responsibly holding both instalment accounts (loans) and revolving accounts (credit cards). Holding loans for a wide variety of assets – higher education, a car and a home, for example – will also work in your favour, provided they are faithfully repaid.

Credit enquiries (10%)

The final factor is a tripping point for many, particularly those with a low credit score. Every time you submit an application that requires a credit check, a note is placed on your report. If multiple notes are placed on your report over a short period of time, say a handful within the space of a month or two, points will begin to be deducted from your score. Since lenders will always check your credit report, it’s wise to keep your applications for finance to a minimum and wait for an answer on one before you apply with another.

Why does my score change?

Your credit score will change because there are so many factors that are considered when calculating your score, there are many reasons why your score may have changed. A few of the more common reasons for score fluctuations are:

• You submitted an application: A recently approved credit card or loan application can strengthen your score, while a recently denied application or the submission of multiple applications in a short amount of time can damage it.
• You changed your credit limit: Altering the terms of your current credit cards or loans can also change your score. Increasing your credit card limit or applying for a personal loan top-up may decrease your score, while decreasing your limits can increase your score.
• You cancelled a credit card or paid off a loan: Unsurprisingly, paying off debt and streamlining your finances can improve your credit score.
• A credit provider gives new information: Credit providers don’t immediately pass all of their information onto Equifax. It can take time for data to appear on your report, which can result in your score changing at seemingly random times.
• A listing expired on the report: All the information on your credit report has an expiration date. Depending on the data that is removed, it may affect your score in a positive or negative way.
• You paid a bill late: Your credit score may drop if you don’t pay a bill or make a monthly repayment on time. On the flipside, an individual with a low credit score may be able to increase it by paying bills and making repayments on time.

How often does my Equifax score get updated?

The short answer is your credit score is updated every time it’s calculated, i.e. whenever someone views your credit report. But that doesn’t mean that it changes from minute to minute, day to day.

Most of the time, your Equifax Score is updated monthly. This is because most creditors supply Equifax with new information on a monthly basis. While your score may change when that information is provided, it generally comes in at around the same time – at the start of a new month – so you can expect your score to remain relatively stable in the meantime.

The key differences between a ‘report’ and ‘score’

What’s the difference between a credit report and credit score? In truth, not much – they essentially offer the same information just in different forms:

• Your credit report provides a comprehensive overview of your finances – your lines of credit, your payment history, and any other details relevant to your ability to manage credit and debt.
• Your credit score condenses this information down into a simple number between 0 and 1200 to indicate how much of a risk you represent as a borrower.

If someone uses the term credit rating, they simply mean credit score. These terms are used interchangeably here in Australia, so it can get confusing depending on where you’re getting your info from. The key thing to remember is the difference between a report and a score/rating, understand that and you’ll be set.

What do the different score ranges mean?

Equifax divides their credit scores into five brackets. Your credit score will fall into one of these ranges, so here’s a quick explanation of each:

Rating	Score	Reasoning
Excellent	833–1200	Scores of 832 or above are in the top 20% of Equifax’s active population. The organisation calculates that the odds of keeping a clean credit file are five times greater than the average individual. The numbers suggest that it is highly unlikely that any sort of adverse event (from failing to make repayments to personal bankruptcy) will occur in the next year, making these individuals prime candidates for banks and lenders. This is where you want to be.
Very Good	726-832	While not at the very top of the pile, scores in this range are still comfortably above average. Equifax calculates that individuals in this range are two times more likely than the average individual to keep a clean credit file. The numbers suggest that it is unlikely that any sort of adverse financial event will occur in the next year. So if you’re here, hang tight!
Good	622-725	Scores in this range sit just above average. Equifax calculates that individuals in this range are slightly more likely to keep a clean credit file than the average individual. The numbers suggest that it is less likely that any sort of adverse financial event will occur in the next year. This isn’t a bad place to be, but there’s certainly room for you to improve.
Average	510-621	Scores in this range are rated average, meaning that Equifax calculates the odds of keeping a clean credit file as average. The numbers suggest that it is likely that an adverse financial event will occur in the next year, which may make it harder for you to gain approval for a credit card or loan. If you fall into this bracket, it’s time for you to do a serious spring clean of your finances!
Below Average	0-509	Scores of 509 or below are in the bottom 20% of Equifax’s active population. The organisation calculates that the odds of keeping a clean credit file are well below those of the average individual. The number suggest that it is more likely that an adverse financial event will occur in the next year, making it very difficult for your to be approved for credit or loans. This is the danger zone. You’ll need to implement some serious changes to get your score on the road to recovery. Fortunately, the only way is up from here!

I don’t have a credit score – should I be worried?

No score is not the same as a score of zero, so there’s no need to panic if you’re new to lending. That said, if you don’t have any sort of personal credit or loan history, it’s impossible for Equifax to assess you as a borrower. If you haven’t had (or applied for) any of the following under your own name, you won’t have a credit score:

• A credit card
• A loan
• A mobile phone contract
• A utility account

Most lenders require an applicant to have some form of credit history before they will approve a credit card or loan application. The good news is, taking out a phone contract or putting a utility like power or water in your name, can help you to quickly build a healthy score. Especially if you pay your bills on time! So, maybe keep that in mind when you’re looking into your next phone plan.

Why you should care about your Equifax credit score

When most of us think of debt our mind wanders to sky-high interest, crippling repayments and maybe even a pair of concrete shoes if you disappoint the wrong creditor. Whether fact or fiction – credit and debt generally gets a bad rap.

In reality, access to money that you don’t have is vital for your long term financial security. Whether it’s a university degree, business capital or a place to call home, there are certain investments in life that the average Aussie can’t afford to pay for upfront but still needs to prosper in life.

A good credit score is vital if you are to seize new opportunities and secure these investments. So, if you take care of your Equifax Score now, you can be confident that it will take care of you later.

Meet Tippla

Do you want to check, monitor and improve your credit score? What if we said it didn’t have to cost you anything? That’s what you get when you sign up to Tippla! Join Tippla for intelligent monitoring and tracking of your credit score to help you smash your financial goals with smart analysis and insights. We’ll help you gain a deeper understanding of your credit by comparing your score from multiple reporting agencies. 

For no cost at all, get your financial well being on track with Tippla in your pocket.

 

While we at Tippla will always do our best to provide you with the information you need to financially thrive, it’s important to note that we’re not debt counsellors, nor do we provide financial advice. Be sure to speak to your financial services professional before making any decisions.

 

Getting started: What is a credit score?

Before we dive into the nitty gritty of how to do a credit check, let’s establish first what a credit score is and why it matters. 

Your credit score is a three digit number that essentially represents how ‘credit worthy’ you are. In other words, how risky it is to lend money to you. Here in Australia, your score can be calculated by any of our three credit reporting agencies: Equifax, illion or Experian. Credit reporting agencies keep a record of your repayment history for any loans or credit provided to you. They then use this information to work out your overall credit score. 

This number is a big deal because it’s a massive reference point for lenders when they assess your finance application. Lenders will access your credit report from these agencies when processing any loan or credit applications that you make. They want to be able to see that you are capable of meeting potential loan repayments on time. You credit score will indicate whether you’re likely to do that.

Credit scores typically range from 0 to 1200, depending on the agency and the higher the number, the better. Your credit score will fall somewhere within a five-point scale of excellent to below average. Here’s a breakdown of each credit reporting agency’s ranking:

	Equifax Score	Experian Score	illion Score
Excellent	833 – 1200	800 – 1000	800 – 1000
Very Good	726 – 832	700 – 799	700 – 799
Good	622 – 725	625 – 699	500 – 699
Average	510 – 621	550 – 624	300 – 499
Below Average	0 – 509	0 – 549	0 – 299

Why should I check my credit score?

Information is empowering! The more you know, the better prepared you can be for whatever curveballs might come your way on your personal finance journey. We recommend you check your credit score regularly for these three main reasons especially:

1. A good credit score gives you negotiating power with lenders 

When you apply for any type of credit (e.g. loans, credit cards or even mobile phone/internet payment plans), it’s important that you have an excellent, very good, or good credit score. This increases the likelihood of your credit application being approved on the best possible terms (i.e. with the lowest interest rate).

Lenders will be more likely to reject your application if you have an average or below average credit score. Or if they do approve it, they’ll be likely to charge you a higher interest rate to compensate for the higher risk of lending you money.

2. You can ensure the information in your credit report is accurate

Can you imagine if you got knocked back for a loan because some incorrect information in your credit report painted you in a negative light? It’s almost too ridiculous to consider, but it happens. You have the legal right to access your credit report and to have any inaccurate information changed by the credit reporting agency. So, why waste it?

3. It can help protect you from fraud

We’re living in the digital age and identity theft has never been easier. Criminals can potentially take out credit in your name without you even realising. A quick check of your credit score can keep you up to date with your financial records and alert you to any potential fraud issues.

When should I check my credit score?

There’s no better time like the present! When it comes to credit scores, it’s always best to do a quick check before you apply for finance with a lender. The fact is, credit scores are sensitive – they don’t handle rejection well. Who does? 

If your application with a lender is rejected, it can negatively affect your credit rating. Plus, if you do have bad credit you can then take steps to improve it before you apply for any finance. 

Bear in mind that your credit score is determined by a number of factors, including:

• your credit history (including whether you’ve made your scheduled repayments on time for any previous credit you’ve received). Lenders centrally record this information with the credit reporting agencies, and it stays on your credit file for five years.
• any unpaid or overdue debt repayment obligations you may currently have, including any bankruptcy proceedings or judgements.
• the number of credit applications you’ve made over the past five years. If you’ve had several unsuccessful applications, it means that lenders generally perceive you as too great a credit risk. 
• whether you’re on the electoral roll and how often you change your address. Lenders prefer stability and transparency with your contact details.

Ways to improve your credit score

It’s not as tricky as you may think. Obviously, one of the simplest ways to earn a good credit score is to ensure you make all of your credit repayments on time. If you’ve always done that, then congratulations – you’re already one step ahead!

Really, the two major things you want to avoid are late or missed repayments. Both negatively affect your credit rating in a big way. You can take simple steps to avoid placing yourself in this position by keeping your creditors informed of any changes to your:

• contact details (i.e. your physical or email addresses and phone numbers), so you don’t miss any important ‘payment due’ notices from your credit provider;
• bank account details, so any of your direct debit repayments aren’t missed.

If, by chance, you do find yourself struggling to meet that credit repayment come due day, then don’t hesitate to reach out to your lender. Nine times out of ten they’ll be able to offer you an alternative repayment plan before you start missing any payments. At the end of the day, it’s in their best interest that you make your repayments. So, don’t be afraid to ask. 

If the issue is you have too many debts to keep track of, it might be worth trying to consolidate them into a single credit arrangement. This will enable you to get on top of your repayments and prevent you from falling behind. 

As you can see, you’ve got options! There are many things you can do to develop and maintain a good credit score. So, if you have credit problems (or have had any in the past), don’t stress. There are steps you can take to improve your credit rating and it’s important that you do. 

Things that hurt your credit score

Bad credit has consequences. If you want to avoid getting knocked back for finance when you need it, here are six things you’ll want to be mindful of:

1. Not paying your debts on time

 You’ll develop a good credit score if you pay any money you owe on time. That doesn’t just include loan or credit card repayments. It also includes utility bills like your electricity and phone charges. If you don’t make your credit repayments on time (or at all), your credit score will drop. It’s as simple as that. This one seems pretty obvious, but the mind can be forgetful. So set a reminder if you need to!

It’s important to understand that catching up on any overdue payments doesn’t remove them from your credit report. All it does is show that the overdue debt has been repaid. 

2. Making too many credit applications

Lenders can see any credit application you make because they are all recorded on your credit file, whether you’re successful or not. Making too many applications in a short period can lead them to think that you’re desperate for credit. It’ll also likely drop your score down a few points, leading lenders to think you’re a higher credit risk. 

3. Making payday lender enquiries

Payday loans are short-term arrangements to borrow low amounts at high interest rates. They can help if you’re struggling to make ends meet but it’s important to understand that applying for one goes on your credit file. This may send a signal to lenders that you’re living from pay to pay. The high interest rates on payday loan products can also make it more difficult for you to make your repayments, making it harder for you to improve your credit score.

4. Having no active credit

You can’t develop or improve your credit rating if you have no ‘active credit’. Or if you’re young and you’ve never had any credit at all, you won’t have a credit history. That means you won’t be able to show a track record of making repayments on time. An easy way to get active credit is to put a utility bill in your name and to make sure you pay it on time. Problem solved.

5. Maxing out your credit card

This means that you spend up to your credit limit on your card. It’s a sign that you’re racking up debt, especially if you’re only making your minimum repayment each month. You’ll have no spare credit capacity, which will make lenders wary of giving you more. 

Credit cards also have high interest rates. Many have interest rates that are three, four or five times higher than other types of finance. Maxing out your credit card will make your repayments more expensive because of the higher interest rates. And if you can’t afford to make them, it will hurt your credit rating.

6. Refinancing/balance transfers

Every time you make a credit application, it goes on your credit file. Any credit application can temporarily lower your credit score, including refinancing applications. So, the benefits of refinancing need to outweigh that temporary drop in your credit score.

For example, it can be a good idea to refinance to get a lower interest rate. It can also be a good idea to refinance and combine two or more debts into a single loan. Doing that will make your repayments much easier to manage. So, a temporary drop in your credit score can be worthwhile in either of those situations.

What’s included in my credit report?

The content of credit reports in Australia has changed since 1 July 2018 with the mandatory introduction of the ‘Comprehensive Credit Reporting’ system. This system was introduced in March 2014; yet the take-up rate among credit providers has been slow.

Prior to the introduction of this system, only negative information was included in credit reports, such as missed or late payment information, as well as defaults. The new reporting system is designed to give a much more detailed picture of your credit history, including:

• all your credit repayment history information for the past two years (both positive and negative), and
• your credit liability information (including the type of credit accounts you currently have or have had, when these accounts were opened and/or closed, credit limits, regular repayment amounts, and the name of your credit provider/s).

In other words, comprehensive credit reporting gives lenders a more holistic picture of your credit history. So if you haven’t checked your credit score since the mandatory introduction of the comprehensive credit reporting system, it’s highly likely that your score will have changed.

How much does it cost to check my report?

You’re entitled to access your credit report once a year for free from the three credit reporting agencies. These agencies must give you a copy of your credit report within 10 days of you requesting it. It can be a good idea to check with two or more agencies to ensure that your rating is consistent. 

If you want to check your credit report more regularly than once a year, there may be fees involved. However, you are entitled to an additional credit free credit report within three months of having a credit application rejected, or if you have had an error corrected.  

Knowing where you stand

Awareness is key. Knowing your credit score will give you an idea of what to expect when you apply for credit. Don’t make the mistake of applying to multiple lenders in the belief that it will increase your chances of an approval. You can’t hide from your credit history. All lenders will have access to much of the same information about your credit history. Plus, as we’ve covered, having multiple applications at once hurts your credit rating. So you can dig an even deeper hole for yourself if you try this misguided strategy.

Some lenders will be prepared to offer you credit even if you don’t have a good credit rating, and some won’t. But always remember that the ones that will approve your application in those circumstances will charge you a higher interest rate. Even a small difference in interest rates can make a big difference to the amount you’ll repay over the life of that debt.

If you don’t currently have at least a good credit score, it makes more long-term financial sense to try and improve it before you apply for more credit. Doing things to improve your current credit score (like budgeting to ensure that you make your existing credit repayments on time) will equip you with the skills you need to better manage your additional credit in the future.

Introducing: Tippla

Do you want to check, monitor and improve your credit score? What if we said it didn’t have to cost you anything? That’s what you get when you sign up to Tippla!

For no cost whatsoever, you can get your financial well being on track with Tippla. We compare your score from multiple reporting agencies to give you the best understanding of your credit. Then, through our smart monitoring and insights, we can help you to reach your financial goals in no time. 

Harness this pocket-sized power, sign up today.

 

At Tippla we’ll always do our best to provide you with the information you need to financially thrive, but it’s important to note that we’re not debt counsellors, nor do we provide financial advice. Be sure to speak to your financial services professional before making any final decisions.

 

What a good credit score can get you

You may not realise it, but credit scores play an essential role in your finances. It’s a fact of life that you’ll probably need to borrow money or get credit at some point to pay for something outside your budget. Chances are, it won’t be just for big things like a house or a new car either. You’re actually asking for credit when you apply for:

• a mobile phone plan,
• a place to rent, and
• electricity or gas accounts for your home.

Landlords and service providers want to be confident that you’ll pay them what you owe on time. A good credit score helps to give them that confidence. It shows you have a good track record of paying your debts.

A good credit score can also help you to negotiate a lower interest rate or reduced fees on a loan. It’s important to understand that even a small difference in interest rates can make a BIG difference to your loan repayments.

For example, the average home loan in Australia is $388,100. If you borrow that amount at 5% interest over 25 years, you’ll pay $292,539 in interest over the life of the loan. But if you borrow the same amount at 5.5% instead, you’ll pay an extra $34,344 in interest! The extra half per cent interest doesn’t sound like much, but it has a massive impact.

How to get a good credit score

So, if credit scores are so important – how can you ensure yours is ranking well? Credit scores typically range from 0 to 1200, depending on the credit reporting agency. In this case, the higher your number, the better.

One of the easiest ways to get a good credit score is to pay all your debts on time. The two major issues that you want to avoid are late repayments, or missed repayments. Both of these situations harm your credit score big time. A bad credit score will see lenders and other credit providers usually do one of two things:

1. reject your application (which will damage your credit score even further); or,
2. charge you a higher interest rate.

You can take simple steps to avoid missing your repayments and damaging your credit score. For example:

• budgeting to make sure that you’re not spending more than you’re earning, and
• letting your credit providers know when you change your contact or bank account details. Doing this will ensure that you don’t miss any bills or direct debit payments.

Other ways that you can get a good credit score include:

• lowering your credit card limits. If you have a lower credit card limit, it reduces the amount of debt that you can rack up. It also reduces the risk that you won’t be able to afford your debt repayments.
• limiting your additional credit applications. Only apply for credit when you need it (and ideally, when you have developed a good credit score so that you can negotiate the lowest possible interest rate and fees).

How to build credit

It’s important to build a good credit rating as soon as you can. Of course, if you’re young and you’ve never had any type of credit before, you won’t have a credit history. That can be a ‘Catch 22’, because many credit providers will need you to have one to approve your application.

So how can you get a credit score in the first place? The answer is that it’s best to start small. You’ll be more likely to be approved without a credit history for smaller credit amounts like mobile phone plans or electricity accounts.

For example, if you currently live with someone who has the gas or electricity accounts in their name, see if you can transfer one or both of them into your own name. You might have to pay a security deposit to the service provider, but when you’re approved and you start making all your scheduled repayments on time, you’ll be on your way towards developing a good credit score. Your security deposit will also be refunded to you when you cancel the service, provided that you’ve made all your repayments.

1. Practise good credit habits

Practising good credit habits right from the start will help you to develop (and keep) a good credit score. Good credit habits include:

• avoiding or reducing your credit card debt. Interest rates on credit cards in Australia are three or four times higher than other forms of credit.
• taking advantage of interest-free periods and paying off your credit card debts in full each month.
• not exceeding credit card limits (you’ll usually be charged additional fees if you do).
• avoiding late fees by paying all of your bills on time.

If you currently have multiple debts, it’s also a smart strategy to consolidate them all into a single debt at the lowest possible interest rate. This lowers your overall repayments and it also makes your debts easier to manage. Instead of having to make multiple repayments regularly, you’ll only need to make a single regular repayment to cover all your debts.

2. Check your scores and reports

It’s important to check your credit score before you apply for any finance. You’re legally entitled to obtain this information. Lenders and service providers will also access your credit score as part of assessing your application.

If you haven’t checked your credit score recently, you may find that it’s changed. In 2014, the government introduced the comprehensive credit reporting system. Before this system was introduced, only negative information was reported by lenders to credit reporting agencies. For example, missed credit repayments or bankruptcy orders.

However, lenders are now required to also report positive credit history information. So, if you missed a repayment on your credit card or home loan three years ago but haven’t missed a payment since, it’s likely that your credit score will have increased. If it has, you’ll have increased negotiating power with lenders. There’s an old saying that ‘you don’t get what you deserve, you get what you negotiate’. That saying can apply to lenders, but it’s important to do your research as some providers will only offer fixed interest rates.

Meet Tippla

Do you want to check, monitor and improve your credit score? What if we said it didn’t have to cost you anything? That’s what you get when you sign up to Tippla!

Join Tippla for intelligent monitoring and tracking of your credit score and watch it grow with smart analysis and insights. Gain a deeper understanding of your credit score by comparing your score from multiple credit reporting agencies.

For no-cost whatsoever, stay on top of your financial health with Tippla in your pocket.

Tippla – for smarter credit checks

Disclaimer: Of course, while we’ll always do our best to provide you with the information you need to thrive financially, we’re not debt counsellors, nor do we provide financial advice. Be sure to seek independent, professional advice that’s based on your individual circumstances before making any financial decisions.