Who Looks at Your Credit Report? A Quick Overview

Who Looks at Your Credit Report

In Australia, you have three credit scores and credit reports. The information contained on your credit report can be the difference between you being approved or rejected for a loan. But who looks at your credit report and why? Tippla has the answers for you below.

Who Looks at Your Credit Report

What is a credit report?

A credit report is a document that contains your recent personal and credit financial information. What does this mean? If you have taken out any form of credit (a loan, credit card, utilities, phone plan, etc), then this will appear on your credit report. 

Specifically, here’s a rundown of what information will appear on your credit report:

  • Personal information – such as your name, address, date of birth and employment;
  • Credit account information – all of the credit accounts you currently have open or have closed in the past two years, such as any loans, credit cards, utilities, and more;
  • Repayment history – your repayment history for your credit accounts will be listed on your report;
  • Credit applications – every time you apply for some kind of credit, regardless of whether you were approved or rejected, it will appear on your report;
  • Negative entries – this includes bankruptcies, defaults, public records and court judgements. 

How long do items stay on your report?

Your whole credit history won’t appear on your report. All of the information has an expiry date. Here’s a rundown of how long you can expect information to stay on your report:

  • Credit accounts – all current accounts, and any that you have closed in the past 2 years;
  • Credit applications – 5 years;
  • Repayment history – your report will show your repayment history over the past 2 years;
  • Defaults – these will appear on your credit report for up to 5 years;
  • Court judgements and bankruptcies – 5 years;
  • Serious credit infringements – up to 5 years.

Why does your credit report matter?

When you apply for any kind of credit, whether it be a mortgage, or even a personal loan or electricity provider, they will check your credit report to see how risky of a borrower you are.

They will look at your credit score, a number ranging from 0 – 1,200 which is based on all of the information contained in your report, as well as your credit file. They will look at this information, as well as other documents that give them an idea of your financial situation, such as your bank statements, employment details, etc.

So, why does your credit report matter? It is one of the ingredients lenders, banks and other credit providers use to determine whether they will accept or reject your application. Therefore, your credit report could be the difference between you being accepted and rejected for a loan.

Who looks at your credit report and why?

With this in mind, who looks at your credit report, and why? Not just anyone can look at your credit report. Your friends, your neighbour, even your employer – none of them can access your credit report. Only companies that you permit to view your report can see your file.

Every time you apply for credit, you are giving the company you’re applying to permission to view your credit report. This permission will often be granted in the terms and conditions of the application. They check your credit report to get an idea of your creditworthiness and assess how much of a risk you are.

Therefore, any company that you apply for a credit card, loan, utilities, phone plan, and more with, can view your credit report – but, only if you permit them. However, generally speaking, if you don’t consent to a credit search, it’s unlikely your application will be processed.

There are a few loans out there that claim to not check your credit score. These are called “no credit check loans”. However, they are usually only small personal loans, and they often come with high interest rates and fees.

What do lenders look for on your credit report?

When lenders, banks, and other credit providers check your credit report, what are they looking for? Generally speaking, when a company looks at your file, they’re trying to get a sense of how reliable you are. 

They will be looking out for any credit defaults, which indicates that you haven’t been able to meet your repayments in the past. They will also check how many open accounts you already have – too many can make you more of a risky borrower.

Other things they will look out for – negative entries, repayment history, maturity of your accounts, and more. The purpose of them checking your report is to get insight into whether you are likely to repay the amount you want to borrow.

Do you have a below-average credit score and want to improve it? Check out Tippla’s helpful guide on how to improve your credit score here.

Why Is Your Credit Score Important? A Quick Overview

Why Is Your Credit Score Important

Whilst your credit score is only a number, it actually can impact your life in a very real way. So why is your credit score important? Tippla has the answers for you below.

Why Is Your Credit Score Important

What is a credit score?

Before we answer the question “why is your credit score important” it’s important to cover the basics first. What is a credit score? If you’re not sure what a credit score is – you’re not alone. In Australia, 73% of Australians don’t know their credit scores or why they are important.

Your credit score is a number ranging from 0 – 1,200. This number represents your creditworthiness (translation: how reliable of a borrower you are). The higher your credit score, the more reliable of a borrower you are perceived to be.

What is a reliable borrower?

A reliable borrower is someone who makes repayments on time. If a person takes out a loan, a reliable borrower would be expected to make their monthly repayments on time and during the length of the loan, completely repay their debt plus interest. 

For a lender, a reliable borrower is seen as less of a risk, as they are more likely to repay the loan in full. A risky borrower, however, might miss payments, or default on their repayments. This means the lender could lose money if the borrower can’t repay the loan. A risky borrower would likely have a below-average credit score.

Who can see my credit score?

Your credit score is sensitive information. This means, not just anyone can see your credit score. You need to provide consent in order for a company to see your credit score.

So when does this happen? Every time you apply for credit – this could be a loan, credit card, phone plan or utilities, you are giving the company you are applying to permission to view your credit score and credit report.

When the credit provider looks at your credit score and report, they can judge how risky of a borrower you are, and determine what products they would be willing to offer you. If you have a below-average credit score, your application could be rejected.

How many credit scores do I have?

In Australia, there are three credit reporting agencies (CRAs) – Equifax, Experian and illion. Equifax and Experian are the two largest global CRAs. Each month credit providers report consumer credit information to either of these three agencies. The information these agencies receive from credit providers is what they use to calculate your scores.

Because of this, you have not one, but three credit scores in Australia. You have one each from Equifax, Experian and illion, and an adjoining credit report which holds all the information your credit score is based on.

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

Your credit report holds all of your recent credit history. This includes any current credit accounts – loans, credit cards, utilities, phone plan, etc. It will also have your repayment history for the last two years, any closed credit accounts from the past two years, and any negative entries (defaults, bankruptcy, court judgements, etc).

Your credit score is a number ranging from 0 – 1,200. Your credit score is based on the information held on your credit report. If your credit report shows a good credit history, then you will likely have a high credit score. However, if there are multiple negative entries on your credit report, then your credit score will likely be lower.

How are credit scores calculated?

This question is a bit tricky because the exact algorithm credit agencies use to calculate your credit score is a well-kept secret. Not only that, but each of the three agencies calculates your score slightly differently. This means your credit scores can be different across the three agencies.

Nonetheless, we do know the general factors they consider when calculating your credit score.

These are the general factors used to calculate your Equifax credit score:

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

For Experian, the main factors it considers when calculating your credit score are:

  • 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.

When is a credit score used?

Credit providers, such as banks, lenders and other financial institutions, use your credit score to evaluate whether they should give you credit or lend you money. They use your credit score to determine how much of a risk you pose and decide whether you qualify for a loan or credit, how much interest they should charge you, and how high your borrowing limit should be based on your credit history.

Why is your credit score important?

With all of this in mind – why is your credit score important? There are several reasons why which we’ve outlined below.

Your credit score can help or hinder your application

Your credit score can be the difference between you being accepted or rejected for credit. If you are applying for a large loan and you have a below-average credit score, the lender you’re applying with might determine that you’re too risky of a borrower and reject your application.

A good credit score, on the other hand, could boost your application. If you have a strong credit history, then a lender might look at your application more favourably and approve your loan application.

This is one of the reasons why your credit score is important.

Interest rates

The interest rates you’re charged when you take out credit can end up costing you a lot over the lifetime of the credit. That’s why it’s a good idea to try and find loans, credit cards and other credit products with lower interest rates.

However, whether you can access low-interest-rate products can be heavily dependent on your credit score. Why is this? Lenders and financial institutions use interest rates as a way of protecting themselves against risk.

If you are deemed to be a risky borrower, then you will likely only be offered products with high-interest rates. That way, they get more money out of you quicker, so if you default on a repayment, they could already have a decent portion of the money they lent to you repaid.

This is another reason why your credit score is important – it can determine what products you’re offered and, if you have a good credit score, save you a lot of money in the long term.

Borrowing limit

Your credit score can also affect how much you can borrow. As with most things, it all boils down to risk. The bigger the loan, the bigger the risk could be for the lender should you default.

If you have a below-average credit score, then a lender might decide that it’s not willing to offer you a high borrowing limit and reject your application or only offer you products with lower borrowing limits. 

However, if you had a good or higher credit score, then a lender could be willing to lend you larger amounts because you’re seen as less of a risk. This is how your credit score can influence how much you’re able to borrow.

What other factors do lenders look at?

It’s important to point out that your credit score is not the only factor that banks and lenders use to determine whether to lend you money. There are a range of factors they consider when making this decision. Nonetheless, your credit score is an important component of their decision.

Here’s what else they will likely consider:

  1. Your bank statements – credit providers will typically ask for your bank statements from the past three months. This way they can get an insight into your spending habits and savings so they can see if you are responsible with your money.
  2. Employment status and income – companies will want to ensure that you have reliable employment. Why? Because reliable employment infers that you are and will continue to receive regular income.
  3. Government benefits – if you rely too much on government benefits then companies might not be willing to lend you money.
  4. Gambling – do you gamble a lot? If so, this could be a red flag for lenders.

What is a good credit score?

A good credit score varies among the three CRAs. This is because they have different scales to rank your scores. Equifax measures your credit score on a scale from 0 – 1,200, Equifax, on the other hand, uses a scale of 0 – 1,000.

Here’s how they categorise your credit score:

good credit score

Source: Equifax and Experian

How can you improve your credit score?

There are many ways you can improve your credit score. Here’s a quick breakdown to get you started:

1. Space out your credit applications

Each time you apply for credit, the company you have applied with will check your credit score. This is known as a hard enquiry and it lowers your credit score. Therefore, it’s a good idea to space out your credit applications.

Instead of applying for multiple loans and types of credit at once, you could instead do your research and make sure you meet the criteria before applying. You could also just make one application and wait and see if you are approved before going on to apply for other credit.

2. Make your repayments on time

Your repayment history contributes to a good chunk of your credit score. If you can show that you can make your repayments on time whenever you take on credit, then this will reflect positively on your credit report and boost your credit score.

On the flip side, if you miss your credit repayments frequently, then these will be listed as defaults on your credit report. Each time you default it will drag down your credit score. Not only that, but defaults stay on your credit report for up to five years. 

This means each time you apply for credit in the next five years, every company you apply with will be able to see that you have previously defaulted on a payment. This will put you in the higher-risk category.

3. Check your credit report frequently

1 in 5 credit reports have some kind of mistake on them. This mistake could be an administration error, or it could be an indication that you’ve been a victim of identity theft.

Either way, mistakes in your credit report can harm your credit rating. That’s why it’s important to check your credit report frequently. That way you can identify a mistake early on and take the steps to remove the mistake.

4. Be consistent

Negative entries remain on your credit report for years. That’s why it’s important to be consistent with your good credit behaviour. One mistake can stay on your report for five years or more, and that mistake can affect your credit applications during this time. That’s why consistent positive credit behaviour can improve your credit score.

The verdict: Why is your credit score important?

To sum everything up, here’s why your credit score is important: 

  • It could be the difference between you being accepted and rejected for credit;
  • It can determine your borrowing capacity;
  • It can affect the interest rates you’re charged (and either save or cost you money in the long term);
  • It can impact what utilities and phone plans you can access.

Can You Buy a House Without a Credit Score?

buy a house without a credit score

Australia’s property market is hot right now, with lots of people flocking to the real estate market. But can you buy a house without a credit score? Tippla has provided you with everything you need to know below.

buy a house without a credit score

Buying a house in Australia

Many Australians are currently entering the property market, either to buy their first home, a new home or investment property. With household savings peaking during COVID-19, and the Australian Government providing a range of stimulus packages for the property market, many Aussies feel like now is the time to buy.

When you’re looking to buy a house, many people need to do so with the help of a mortgage – a loan that is provided by the bank or a similar financial institution. According to the Australia Bureau of Statistics (ABS), as of October 2020, the average mortgage in Australia was $453,133.

Unsurprisingly, residents of New South Wales on average have the largest mortgages on average. Following NSW is Victoria and then South Australia. 

Where can you apply for a mortgage?

You might be surprised to learn that it’s not just banks that offer home loans. In Australia, there are three main types of financial institutions where you can apply for a mortgage. The first of these three, is, of course, banks. 

However, you can also apply for a home loan with mutuals, otherwise known as “member-owned” lenders. These range from building societies, credit unions and member-owned banks.

Furthermore, you can also apply for mortgages with non-bank lenders, which are privately owned institutions. This type of lender is neither a bank nor mutuals, as they don’t hold a banking licence.

What do lenders consider when you apply for a mortgage?

When applying for a mortgage, financial institutions will take a number of factors into consideration. This includes your credit score, salary, length of employment, spending habits and more.

Here are some of the most common home loan requirements:

  1. Credit score (the higher the better);
  2. Deposit (at least 5%);
  3. A stable income;
  4. Personal ID, such as Driver’s Licence, Passport and similar documents;
  5. Stable financial position;
  6. Bank statements and payslips.

All of these factors and more give the institution you’re applying to a good overview of your financial situation. It allows them to judge how risky of a borrower you are, and make their decision accordingly.

Why do you need a credit score for buying a house?

Your credit score is a numerical representation of your creditworthiness, AKA, how reliable of a borrower you are. Typically, if you have a high credit score, then you are perceived to be less of a risk. Therefore, you’re more likely to be approved for finance.

Your credit score is based on your credit report. Your credit report provides an overview of your credit history. It allows lenders to see how responsible you have been with your debt.

Because of this, not having a credit score and credit report could be viewed as a red flag by lenders. It gives them one less measurement to determine how big of a risk you are. 

As a result, you might be charged a higher interest rate, which can cost you in the long run, or your application could be rejected. Having a good credit score could improve your chances of being approved for a mortgage.

How to buy a house without a credit score

Whilst having a credit score, especially a good credit score, can help your home loan application, you can still get a mortgage without a credit score. There are a number of things you can do to overcome this obstacle. 

However, it is worth pointing out that if you are applying for a mortgage without a credit score, you might have access to fewer loan options, only be offered loans with higher interest rates, and less desirable conditions. Furthermore, because of responsible lending standards, you might only be able to apply for a smaller loan amount.

Prove you’re in a strong financial position

One of the main focuses for lenders is checking whether potential borrowers are in a strong financial position. If you can prove that you’re in a strong financial position, then this could go a long way in helping your application.

So how can you do this? If you can show that you have a full-time stable job, a strong income, you can save money on a monthly basis, and show that you don’t have a history of dishonour fees and defaults, then these can all help your case.

Nonetheless, it is important to keep in mind that if you don’t have a credit score, then you’re starting at a disadvantage.

Here is a quick overview of some of the potential downsides of buying a house without a credit score:

  • Limited choices of lenders;
  • Higher interest rates;
  • Smaller borrowing limit;
  • Stricter loan terms and conditions.

How to build a credit history from scratch

If you’re thinking about buying a house but you don’t have a credit score, you could consider trying to build a credit history before applying for a mortgage. We’ve put together a few tips on how to build a credit history from scratch.

Open an Australian bank account

If you don’t already have your own bank account, then this could be a good place to start. Having a bank account could help you apply for credit later on. So whilst opening a bank account won’t immediately help you create a credit history, it is a good first step.

Bank accounts are also important when applying for finance. This allows lenders to see your spending habits and how you manage your money. If you are responsible with your spending, then this could go a long way for your application.

Add your name to your utilities

If you are living out of home and your name isn’t on your utility bills, it might be time to change that. Your utility bills are a form of credit. If your name is on the bill, then each payment you make on your bill goes towards building your credit score.

Apply for a credit card

One way you can build your credit history is by applying for a credit card. If you don’t have a credit history, your choices are more limited than if you did have a credit score. Nonetheless, there are options, as banks and financial institutions will take other factors into account.

If you are a tertiary student studying at either university, TAFE, VET or an apprenticeship, then you could be eligible for a student credit card without a credit history. However, it’s a good idea to compare your options beforehand.

If you’re not a student, there are still other options. You could, for instance, apply for a secured credit card. Similar to a secured personal loan, a secured credit card is when you have a cash deposit in your bank account that is the same amount as your credit limit. That way, it is guaranteed to be paid.

Proactively provide information to credit bureaus

If you don’t have any credit, then credit bureaus won’t have any information on you. One way you can overcome this is by reaching out to provide your information. This could be in the form of sending a document to prove your identity and address. However, it’s important to update your information when necessary – such as your address, so that you don’t end up with multiple files with different credit information.

Can I buy a house without a credit score?

To sum it all up, simply put, whilst you can buy a house without a credit score, it’s not necessarily your best option. If you don’t have a credit score, you might have access to fewer loan options. Not only that but the loans that you are offered might not be as good, as you are deemed a riskier borrower. This could mean higher interest rates, lower borrowing limit, and other fees.

Is Afterpay Bad For My Credit Score? Here’s a Quick Overview

is afterpay bad for my credit score

With Buy Now Pay Later (BNPL) platforms, especially Afterpay, becoming an increasingly popular payment option, we’re exploring the potential negative effects of Afterpay and answering the question “is Afterpay bad for my credit score?”. Find out the answer below. 

is afterpay bad for my credit score

What is Buy Now Pay Later?

As the name suggests, BNPL platforms allow customers to buy an item now and pay it off later, typically in fortnightly instalments. These type of platforms are useful for people who want to make a big purchase but they might not be able to afford the full amount upfront. It gives them the opportunity to space out the cost over multiple pay periods.

BNPL platforms are similar to the layby system used by many retail stores. However, the difference with BNPL platforms is that they generally pay the retailer for the goods upfront, so the customer can receive them instantly, and then the customer pays the BNPL platform back.

Some of the most common BNPL platforms are Afterpay, Klarna, Zip Co (Zip Pay and Zip Money), Splitit, Sezzle and more.

Buy Now Pay Later in Australia

BNPL platforms have really taken off in Australia, with Afterpay at the forefront of the movement. According to a recent report released by the Australian Securities and Investments Commission (ASIC), the total amount of credit extended under BNPL arrangements almost doubled from the 2017–18 financial year to the 2018–19 financial year.

Specifically, the November 2020 report outlined that as of June 2019, there were more than 6.1 million open BNPL accounts. This represents up to 30% of the Australian adult population.

Not only are a range of new competitors entering into the Australian landscape, but established licensed credit providers have started to offer a BNPL arrangement or alternative. This includes some of the largest banks in Australia – Commonwealth Bank of Australia, National Australia Bank (NAB) and Citigroup.

How does Buy Now Pay Later work?

Say you want a dress for $400, an example of using a BNPL platform is you’d only have to make an initial payment of $100, and over the next 6 weeks, each fortnight you would need to make another payment of $100 until the whole amount has been paid off. 

Many retailers now offer Afterpay, or similar BNPL platforms as a method of payment, as an alternative to paying with cash, debit or credit. Typically, all you need is an account via the app or website to make a transaction. This will be connected to a card or bank account, and the payments are commonly deducted automatically. You can also set up an account when you’re at the retailer, and once you’ve provided all your details, you will often get approval within seconds.

BNPL are similar to a loan, although they generally don’t come with interest, however, there can be fees associated with this kind of payment method, including late fees, overdraft fees from your bank, and interest if your account is connected to a credit card. 

What is Afterpay?

Afterpay is a company established here in Australia in 2015, which operates in Australia, Canada, the United Kingdom, the United States and New Zealand. It is one of the leading Buy Now Pay Later (BNPL) platforms, allowing shoppers to pay for items in instalments, instead of having to pay the full amount upfront.

What are the risks of Afterpay and BNPL?

Afterpay allows you to make interest-free instalment payments for your purchases. According to its website, you’ll only incur fees if your payments are late. Another perk of Afterpay is an “instant approval decision”, where you’re notified whether you’re approved within seconds. 

Whilst this all sounds great, are there risks associated with Afterpay? The simple answer is yes, so let’s take a closer look.

1. Afterpay can encourage impulse spending

Afterpay can be a great tool that allows customers to make larger purchases and break down the payments into more affordable instalments. However, one of the downsides of Afterpay and similar BNPL platforms, is that it can encourage impulse spending.

In fact, BNPL arrangements can actually make us spend more. Mel Browne, Author and Financial Wellness Advocate outlined the dangers of using Afterpay and similar services. As she outlined, the process of using cash causes the insular cortex of our brain to light up and it registers as pain. Credit cards and BNPL services don’t have this same effect, so we’re more likely to spend more.

Specifically, Browne argues that although there are dangers with credit cards, the risks are even greater with BNPL. She explains it like this: say you make a purchase of $100. This will be spread over 4 payments of $25. Your brain is likely to process this as only $25 – not $100. 

Therefore, your brain registers less pain, and you’ll likely end up spending more. This could then lead to you overspending and struggling to make your repayments.

2. Late payment fees

Whilst Afterpay doesn’t charge interest, there are late fees, which can end up costing you. As highlighted above, because of the psychology behind BNPL, you’re more likely to overspend and struggle to make your repayments. Therefore, there is a real risk of incurring late fees.

This was highlighted in ASIC’s report, which showed that 21% of BNPL users who were surveyed missed a payment in the last 12 months. For the 2018-2019, financial year missed payment fee revenue for the BNPL providers in the review exceeded $43 million. This was up by 38% from the previous year.

“One in five consumers surveyed told us that in the last 12 months they had missed or were late paying other bills in order to make their buy now pay later payments on time,” ASIC said in its report. “These consumers missed paying things such as household bills (44%), credit card payments (32%), and home mortgage payments (22%).”

3. You can’t choose your payment schedule

Another downside of Afterpay and other BNPL platforms is that you typically can’t choose when your payments come out. This can increase your risk of overdraft, and incurring late fees from your bank.

4. It can harm your chances of being accepted for a loan

Lending requirements have become a lot more strict in recent years in Australia. Because of this, anecdotes have surfaced of people being rejected for home loans and other types of finance because they had Afterpay or they spent too much money on Uber Eats.

When it comes to Afterpay, lenders still look at this as a line of credit, because you’re borrowing money that you don’t have. If you rely on Afterpay for a lot of expenses, then this indicates to lenders that you’re not responsible with your finances. 

Even if you don’t rely on Afterpay that much, lenders will still take a look at your BNPL spending habits, along with your other debts, to deem how risky of a borrower you are.

How does Afterpay affect my credit score?

Let’s get stuck into the next question – does Afterpay affect your credit score? Here’s what Afterpay has to say about it:

“Afterpay does not affect your credit score or credit rating. Your credit score can be impacted when somebody does a credit check on you or if you are reported as paying debts late; at Afterpay, we never do credit checks or report late payments.”

However, it is worth highlighting, that Afterpay’s Terms & Conditions do give it the authority to perform credit checks and also allow it to report “any negative activity on your Afterpay Account (including late payments, missed payments, defaults or chargebacks) to credit reporting agencies”.

So what does this mean? Basically, Afterpay doesn’t typically report your late payments or perform credit checks, but that doesn’t mean it won’t. That’s something to keep in mind when considering whether to start using Afterpay.

Other BNPL platforms, like Klarana, do perform a credit check when you use its services. Other platforms, like Zip, humm, Openpay and Payright all say they might perform a credit check, or that they reserve the right to perform a credit check, depending on the platform.

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.