What Affects My Credit Score? A Quick Guide

what affects my credit score

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

what affects my credit score

What is a credit score?

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

What is a good credit score?

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

good credit score

Source: Equifax and Experian

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

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

What goes onto your credit report

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

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

What affects my credit score? 

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

Here’s what goes onto your Equifax credit report:

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

Here’s what goes onto your Experian credit report:

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

What harms my credit score

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

What harms your Equifax credit score

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

What harms your Experian credit score:

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

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

What improves my credit score

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

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

Tips to improve your credit score 

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

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

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

How to fix my credit score

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

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

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

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

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

How To Check My Credit Report For Free

How To Check My Credit Report For Free

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

How To Check My Credit Report For Free

What is a credit report?

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

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

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

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

What goes onto your credit report?

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

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

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

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

How long do items stay on your credit report?

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

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

Why does my credit report matter?

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

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

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

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

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

How to check my credit report for free?

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

Request your report from the credit bureaus

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

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

Sign up to a platform like Tippla

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

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

Does checking my credit report hurt my credit score?

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

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

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

How to Remove Negative Entries From Your Credit Report

how to remove negative entries from your credit report

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

how to remove negative entries from your credit report

What is a negative entry on your credit report?

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

Examples of negative entries include:

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

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

How long do negative entries stay on your credit report?

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

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

How do negative entries affect your credit score?

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

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

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

How to remove negative entries from your credit report?

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

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

If the information is correct

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

If there has been a mistake

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

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

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

Defaults on your credit report

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

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

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

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

How to remove defaults from your credit report

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

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

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

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

How do defaults affect my credit score?

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

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

Bankruptcies and court judgements

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

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

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

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

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

How does bankruptcy affect your credit score?

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

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

Protect your credit score

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

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

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

Keep an eye on your credit report

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

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

How Long Does Bankruptcy Stay on Your Credit Report?

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

What is bankruptcy?

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

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

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

Different types of bankruptcy

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

Personal insolvency agreements

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

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

Debt agreements

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

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

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

Bankruptcy in Australia

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

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

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

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

How does bankruptcy affect your credit score?

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

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

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

How long does bankruptcy stay on your credit report?

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

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

2 years from when your bankruptcy ends or;

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

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

How to avoid bankruptcy

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

Know where you’re at

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

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

Pay what you can

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

Extra tip: reduce your spending

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

Reduce your debt

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

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

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

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

Reach out for help when you first notice the problem

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

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

Check your credit report

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

How long does bankruptcy stay on your credit report?

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

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

Why Are My Credit Scores Different? Here Are 3 Reasons

Why Are My Credit Scores Different?

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

Why Are My Credit Scores Different?

What is a credit score?

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

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

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

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

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

Why are my credit scores different? 

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

Equifax, Experian and illion use different scales 

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

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

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

They use different algorithms to calculate your credit score

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

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

Other things the credit bureaus look out for are:

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

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

Not all lenders and banks report to all credit bureaus

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

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

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

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

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

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

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

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

Why are my credit scores different?

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

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

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

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

How Are Credit Scores Calculated in Australia?

how are credit scores calculated

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

how are credit scores calculated

Credit scores in Australia

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

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

Examples of credit

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

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

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

What is a good credit score?

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

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

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

Equifax and Experian credit scores

Source: Equifax and Experian

Understanding the difference between your credit score and credit report

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

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

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

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

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

How does Equifax calculate my credit score?

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

According to Equifax, the general factors considered in credit score calculations are as follows: 

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

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

how equifax calculates credit scores

How does Experian calculate my credit score?

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

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

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

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

How does illion calculate my credit score?

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

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

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

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

Credit score calculator

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

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

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

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

How to improve my credit score

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

Space out your credit applications

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

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

Make your repayments on time

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

Keep your credit accounts open

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

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

Check your credit report frequently

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

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

Keep an eye out for mistakes on your credit report

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

How Are Credit Scores Calculated in Australia?

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

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

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

How to Report Credit Card Fraud: Protect Yourself and Your Credit Score

report credit card fraud

Fraudsters are adopting more sophisticated methods to steal your card details. Tippla has put together a guide on how to protect yourself and your finances, and, if the worst should happen, report credit card fraud.

report credit card fraud

As technology advances, you don’t need to only worry about someone stealing your credit card out of your bag. But also that your details might be stolen online. So how can you protect yourself from and report credit card fraud if you do fall victim?

What is credit card fraud?

Let’s start by going over what is credit card fraud. As outlined by Experian, credit card fraud is “when someone uses your credit card or credit account to make a purchase you didn’t authorize”.

This could happen in many ways. A thief could steal your physical credit card and use it to make purchases. Alternatively, scammers could steal your details online, such as your credit card number, PIN and security code. With these details, they can make purchases online without having your physical card. 

Types of credit card fraud

Credit card fraud comes in many shapes and sizes. Sometimes the fraud is physical, for example, they steal your credit card from your wallet, or the scam is online. This is referred to as card-not-present (CNP) fraud.

Here’s an overview of the different types of credit card fraud:

Credit card theft – when someone steals your credit card from your wallet, bag, car – wherever you keep it;

Using lost or stolen cards – say you dropped your credit card somewhere, and an opportunist picks it up. They proceed to use your card as if it was their own instead of reporting it to police;

Counterfeit cards – counterfeit credit cards are physical cards that were created with real account information that has been stolen from victims using a device called a “skimmer”. Often, the victims still have their real cards, so they’re not aware that their details have been stolen.

Intercepting and using mailed cards – when someone orders a new credit card and it’s sent to their address in the mail, fraudsters will steal this mail and use the card. Whilst credit card companies do their best to protect the cards during transit, they can be stolen from your mailbox.

Account takeover – as the name implies, account take over is when someone takes over your account. They could do this by getting your address and basic information and learn some of your security questions, such as your mother’s maiden name. Once they have this information, they’ll call up your bank or provider and change the account details. They might change the address, so a new card is sent to their address and not your own.

Fraudulent applications – using your details, such as your name, date of birth and address to apply for credit cards in your name.

CNP – card-not-present fraud is when scammers steal your details when you pay for something online. For this type of fraud, they only need basic information such as your credit card number and name to execute the fraud.

Credit card fraud in Australia

Although credit card fraud is an issue in Australia, there is an encouraging declining trend. According to figures released by the industry self-regulatory body Australian Payments Network (AusPayNet), fraud on payment card transactions dropped by 15.4% to $447.2 million for the 12 months to the 30th of June 2020. This continued the declining trend recorded in the previous year.

CNP fraud, which is when someone’s credit card details are stolen online and used in mainly online transactions, fell by 14.0% year-on-year down to $392.4 million.

Even though these figures are encouraging, that’s not to say that credit card fraud isn’t a real threat. 

Credit card fraud vs identity theft

Identity theft is a type of fraud where someone uses another’s identity to either steal money or gain some kind of benefit. Credit card fraud is a type of identity theft. This is because the scammers are using your credit card details to make purchases without your consent.

As outlined by the Australian Competition and Consumer Commission’s (ACCC) scam statistics website Scamwatch, common methods of identity theft include phishing, hacking, remote access scams, malware and ransomware, fake online profiles, document theft and data breaches.

How to tell if you’re a victim of credit card fraud

The Australian Federal Police outlines the following ways you can identify if you have been a victim of identity theft:

  • Items have appeared on your bank or credit card statements that you don’t recognise;
  • You applied for a government benefit but are told that you are already claiming;
  • You receive bills, invoices or receipts addressed to you for goods or services you haven’t asked for;
  • You have been refused a financial service, such as a credit card or a loan, despite having a good credit history;
  • A mobile phone contract has been set up in your name without your knowledge;
  • You have received letters from solicitors or debt collectors for debts that aren’t yours.

How to report credit card fraud

Credit card fraud can happen even when your card is still in your wallet. Therefore, it’s a good idea to monitor your credit account to see if there are any suspicious transactions.

If you discover there are purchases on your credit account that you haven’t authorised, then you might be a victim to credit card fraud. If that’s the case, here’s what you should do:

Alert your credit card company

The first thing you should do if you discover you’ve been subject to credit card fraud is to immediately contact the credit card company and alert them to the fraudulent activity. They should put a hold on your account so the fraudsters can’t make any more purchases, and reimburse you the money. 

Change your online passwords and PINs

Once you have alerted your credit card company or bank to the fraud, you should log into your account and change your online banking password and PIN. Password managers can help you create complex passwords that are hard for fraudsters to crack. You might want to consider using one of these to help create a strong password and prevent further fraud.

Check your credit report

Your credit report can be a valuable resource to help you detect credit card fraud and identity theft. Your credit report outlines all of the different credit accounts you have. If you check your report and see that you have credit accounts open that you never authorised, then you might be a victim of credit fraud.

If you have been a victim of fraud, then you should contact the three credit reporting agencies in Australia. These are Equifax, Experian and illion. You should report the fraud to each of these credit bureaus. You can ask them to place a ban on your consumer credit information.

Placing a ban on your consumer credit information can help prevent fraudsters opening accounts in your name. During the time the ban is in place, credit providers won’t be able to view your credit report without your written permission. Credit providers can’t open up an account without viewing your report.

You can also add a fraud alert to your credit report with each of the agencies. This means you will receive a notification when certain changes happen to your credit file.

Report credit card fraud to the police

If you are a victim of fraud, you should report credit card fraud to the police. If your details have been stolen online, you can report the fraud via ReportCyber on their website here. You can also call the following number: 1300 292 371.

How to protect yourself from credit card fraud

As the saying goes, prevention is better than cure. Here are some things you could do to protect yourself from falling victim to credit card fraud.

Keep your wallet or purse secure at all times

Whilst online scams are a real threat, thieves can still steal your credit card from out of your bag. When out in public, you should keep your wallet or purse secure at all times to stop it from being stolen.

Shred financial documents before putting them in the bin

The Australian Federal Police recommends shredding any personal or financial papers before you throw them away, so people can’t access your details. Alternatively, you should keep them in a secure place if you want to retain them.

Be careful when using your card

When you’re out in public, you should always cover the keypad at ATMs, to stop strangers from viewing your pin. The same goes for when you’re entering your pin on EFTPOS terminals.

You should also be aware of your surroundings and keep an eye out for anyone trying to watch you. Sometimes, scammers might try and attach technology to the ATM or EFTPOS terminal to scan your details. You should look out for any strange or loose fixtures attached.

For extra protection, you can ask your bank or financial institution for a credit or debit card with an embedded microchip. These are more secure than cards that only have magnetic stripes.

Be mindful of where you provide your details

When you’re shopping online, you should be mindful of where you provide your details. You should only buy from reputable companies or from ones whose security measures you can verify.

One method you can do is look at the company’s web address. With the https the “s” indicates that the site is secure.

On the other side of this, if you’re using a public computer, such as an internet cafe, or using an unsecured wireless connection (AKA a hotspot), avoid doing your internet banking or making payments.

Furthermore, you should be cautious of who you provide your personal and financial information to – both online and offline. 

How can credit card fraud hurt your credit score?

Your credit report details all of your current credit accounts, as well as any credit you’ve had over the past two years. The impact fraud will have on your credit score, however, depends on what the scammer does with your details.

If they max out your credit card, this will hurt your credit score, as it indicates that you’re not responsible with your finances. If they make multiple applications in your name, this could also harm your rating.

However, it is important to highlight that although credit card fraud can hurt your credit score initially, once you alert the credit reporting agencies to the fraud, they will remove the fraudulent accounts or transactions and your credit score will revert to what it was.

Keep a watchful eye

Although credit card fraud might be on the decline in Australia, it remains a real threat for Aussies across the country. Even if you do all of the right things you could still become a victim to fraud. Constantly checking your accounts, prioritising your online security and knowing how to report credit card fraud could help you reduce the damage if your details are stolen.

Credit Repair Companies: Are They Worth It?

In life, there’s rarely a quick fix. The same can be said for your credit score. You should be wary of any credit repair company promising to fix your credit score in a short amount of time.

If you have found a mistake or an issue on your credit report, you might be trying to find out how to repair your credit report and, as a result, improve your credit score. During your search for answers, you may have come across credit repair companies. But what are credit repair companies and are they worth it?

Credit repair companies often promise to fix your credit score by fixing issues on your credit report for a fee. They usually promise fast results and high approval rates. Whilst this might seem like a great deal, unfortunately, the age-old saying comes into play here – if it sounds too good to be true, it probably is.

Credit repair companies in Australia

In Australia, there are a number of companies promising fast credit report repair or guarantee to fix your credit score in no time at all. However, we’re here to let you in on a secret – most of the quick fixes these companies promise to do are actually things you could do yourself, and for no cost whatsoever. 

In some instances, however, there might not be a way to fix your credit score overnight. But, that doesn’t mean it can’t be done! As the saying goes, good things take time.

Should you use a credit repair company?

The tricks credit repair companies use to improve your credit report, are actually things that you can do yourself, and for free! So whilst a credit repair company might be able to improve your credit score and repair your credit report, you’re most likely just paying someone to do something you could do for yourself!

In the end, it’s always up to you. But, we’ve put together a short guide on how you can repair your credit report for free!

How to repair your credit report

Your credit score is an important number. It can be the difference between you being approved or rejected for a loan, a rental apartment, utilities and more. Your credit score is a 4-digit number ranging from 0 to 1,200. This number is based on your credit report which details information on your credit history – your credit accounts, credit applications, repayment history, defaults and more.

If you have a below-average credit score, then it might affect the loans and credit you apply for. Not only could a poor credit score result in you being rejected for finance, but it could also mean that you only have access to loans with higher interest rates and fees, which will cost you more in the long run!

1 in 5 credit reports contain some kind of mistake on them. These mistakes can damage your score. In Australia, you have a right to get any mistakes on your report fixed for free, and this is something you can do yourself.

Common mistakes on your credit report

Now you know that you can actually fix mistakes on your credit report for free, let’s take a look at some of the most common mistakes Aussies find on their credit reports.

Generally speaking, there are two types of mistakes made – those made by the credit reporting agency, which in Australia is either Equifax, Experian or Illion, or mistakes made by the credit provider. Your credit provider might be the company you have taken out a loan with, the bank that provided you with a credit card, or the financial institutions you applied for finance with.

When it comes to the credit reporting agencies, most often, they might have recorded your information incorrectly on your report, such as your name, date of birth or address. Furthermore, you might find that your debt – ie. a loan or credit card limit, has been listed more than once, or the amount of the debt is wrong.

When it comes to errors made by the credit provider, the Australian Securities and Investments Commission’s (ASIC) Moneysmart, highlights the following common mistakes:

  • Incorrectly listed that a payment of $150 or more was overdue by 60 days or more;
  • Did not notify you about an unpaid debt;
  • Listed a default (an overdue debt) while you were in dispute about it;
  • Didn’t show that they had agreed to put a payment plan in place or change the contract terms;
  • Created an account by mistake or as a result of identity theft.

How to fix mistakes on your credit report

If you’ve taken a look at your credit report and you’ve spotted a mistake, what should you do next? If the change is about your personal information rather than about enquiries or accounts, then it’s likely a mistake from the credit reporting agency. You can directly contact your credit bureau and request a change. 

If the mistake is regarding accounts or enquiries, you can contact your credit provider directly and ask them to change the entry. After investigating, the credit provider will then report back to the credit bureau and the change will become visible on your report. 

If you can’t resolve the issue, you can contact a free financial counsellor to mitigate, or directly reach out to the Australian Financial Complaints Authority (AFCA). However, you should try and solve this on your own terms first. 

Improve your credit score

If your poor credit score hasn’t been caused by an error on your credit report, never fear! There are still plenty of other ways you can improve your credit score. We recently put together a quick guide to help you fix your credit score.

Before we give you tips on how to improve your credit score, it’s important to understand what goes onto your credit report and how long certain events stay on your report.

  • Credit accounts – any open credit accounts and accounts that have been closed in the past two years
  • Credit enquiries –  5 years 
  • Repayment history – for 2 years 
  • Defaults – 5 years 
  • Court judgements – 5 years
  • Bankruptcies – at least 5 years 
  • Serious credit infringements – 7 years 

Watch your credit applications

You might not realise it, but making multiple applications for credit, such as applying for multiple loans at once, can be damaging to your credit score. This is because each time you apply for credit the company you have applied to will check your credit report to see how risky of a borrower you are. This check registers as a hard enquiry on your credit report and can harm your credit score for a period of time. The more applications you make, the more damage you’ll do to your credit rating. 

Not only will multiple hard enquiries lower your credit score, it could also lead to you being rejected for a loan or other types of credit. Think of it from the perspective of a lender. You’ve just applied for a loan and they want to see if you’re a risky borrower. They check your credit score and see you’ve applied for multiple loans all at the same time. This could imply to them that you’re in financial distress, which means, you’re more of a risk. As a result, the lender could reject your application or provide you with the loan with a higher interest rate and fees – which will cost you.

Make your repayments on time

Your repayment history has a lot of weight when it comes to your credit score. This is because your rating is based on how well you can manage your debt. If you consistently pay your bills and make your credit repayments on time, then this is a clear demonstration that you are responsible with your debt, and therefore, a reliable borrower.

Let your credit accounts get old

This might seem strange at a first glance, but the age of your credit account can contribute positively to your credit score. The older the account, the better it is for your rating, as it demonstrates that you can consistently handle a line of credit.

Another way you can improve your credit score is by keeping your credit accounts open. Whilst we’re not advocating that you keep multiple credit accounts open just for the sake of it, you might want to consider keeping some open and in use so credit reporting agencies have data to base your credit score on.

Credit repair companies: are they worth it?

If you’re wanting to repair your credit report and fix your credit score, then this is generally something you can do yourself for no cost whatsoever. Because of this, whilst credit repair companies might be able to help you, anything that these companies are promising to do, are also things you could do yourself.

At the end of the day, the decision is yours. But it’s good to have all of the information on hand so you can make an informed decision. If you’re ever unsure, you can reach out to a free financial counsellor who can help you make the best decisions for your current situation.

New Year, New Credit Score: Take Control of Your Credit

The new year is upon us. It’s time to embrace the #newyearnewme motto and take control of your credit score and boost your rating.

2020 will definitely go down as an interesting year in history, especially here in Australia. We started off the year with bushfires, then COVID-19 swept in, forcing us all into lockdown, and just so we could experience the full spectrum – we closed the year with floods in some parts. 

Although COVID-19 is still with us, 2021 can still serve as a fresh start – especially for our credit scores. So, how can we use the new year to get on top of our credit scores, and ultimately, improve our financial situation? We here at Tippla have put together a few ideas.

Check your credit score

Before we can even begin to improve our credit scores, you need to first know what your credit score is. A lot of people ask us, “how can I check my credit score?”. Unfortunately, there’s not a lot of education in Australia on what your credit score is, and how you can check your credit score. That’s why Tippla is here to help!

When you sign up to Tippla, you can see what two of your credit scores are – one from Equifax and the other from Experian. It’s important to know where you’re at before you start trying to make changes.

You can also contact the credit reporting agencies in Australia directly for a copy of your credit report. In Australia, there are three reporting agencies – Equifax, Ilion (CheckYourCredit), and Experian.

What is a good credit score?

Once you log into Tippla, you’ll see two separate numbers ranging from 0 to 1,200 – these are your credit scores. Your credit scores are categorised on a five-point scale, ranging from below average, all the way to excellent. 

So, how can you know if you have a good credit score? Here’s how Equifax and Experian rank your credit scores.

Understand your credit report

After you’ve checked your credit score, it’s important to understand why you have achieved your given ratings. Whether you’ve received a below-average rating, all the way up to excellent, there is a reason as to why.

If you have a below-average rating, firstly, never fear – there are many ways you can improve your credit score. In fact, Tippla recently put together a quick guide on how you can fix your credit score. 

There are a number of things that can damage your credit report – defaults on your credit repayments, too many credit applications, too many loans, and more. 

How long does it take to improve your credit score?

Unfortunately, you can’t improve your credit score overnight – but it definitely can be done! The main ingredient that can help you improve your credit score is time. Mix in some consistent positive credit behaviour and you have the perfect recipe for a better credit score.

But how much time are we talking about here? Well, there’s no set time limit for how long it will take. It completely depends on each individual situation and if there are any significant negative entries.

The good news is that even significant negative entries will age over time and get progressively less powerful. However, for most of them, it takes up to 7 years until they fully disappear. 

Here’s what stays on your credit report and for how long:

  • Credit accounts – any open credit accounts and accounts that have been closed in the past two years
  • Credit enquiries –  5 years 
  • Repayment history – for 2 years 
  • Defaults – 5 years 
  • Court judgements – 5 years
  • Bankruptcies – at least 5 years 
  • Serious credit infringements – 7 years 

To help you fix your credit score, here’s a helpful article Tippla put together outlining the dos and don’ts of credit.

Identify your bad habits

Now it’s time to identify your bad credit habits. A bad credit score can have numerous consequences, such as your loan application being rejected, higher interest rates and premiums, and a number of other implications.

Before you can improve your credit score, you need to identify your bad habits. We’ve put together a list of the most common offenders below.

Defaults

A default is when you don’t make one of your repayments – whether that’s for a loan, a credit card, or even your electricity bill. A default is generally when you haven’t made the repayment within a timely manner and you haven’t made arrangements with your credit provider to defer the payment or set up some kind of payment plan.

As outlined by the Office of the Australian Information Commissioner, a credit provider can list a default on your credit report if:

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

Defaults can leave a big mark on your credit report and generally take 5 years to disappear from your credit report. This means, any time you apply for a loan or some kind of credit, the provider can see that you previously defaulted on your repayment. This could lead to them rejecting your application, as you’re deemed too high of a risk.

If you have been rejected for a loan, Tippla recently put together a step-by-step guide on what you can do next and how you can harness your credit score for good.

If there are any defaults on your credit report, then it might be worth reflecting on why you defaulted on your repayment.

Preparing for life’s curveballs

Life throws us curveballs, and sometimes, this can put us under financial strain. It doesn’t make you a bad person if you are in financial hardship. But one way to protect yourself from defaulting on payments could be an emergency fund.

Having an emergency fund in place could be a good way to protect yourself from life’s unexpected challenges. It’s totally up to you how large your emergency fund is. The general rule of thumb is to have enough money set aside that could support you for a three month period.

It’s OK if you don’t have that money available now. You don’t have to rush. You could set up a savings account and slowly save towards your goal. If you want to take it easy, you could start with the goal of saving one month of income as a safety buffer. Once that is achieved, you could then save your way towards three months. 

Too many credit applications

When you apply for credit, whether it’s a loan, credit card, or another type of credit, it will show on your credit report as a hard enquiry. When it comes to your credit report, there are two types of enquiries made – soft and hard. 

A soft enquiry does not impact your credit score and generally occurs when you check your own credit score or when a promotional credit offer is provided to you.

Hard enquiries, on the other hand, are done when you apply for some form of credit, such as a loan or credit card. Your chosen credit provider will take a look at your application and, in order to assess how risky of a borrower you are, will look at your credit score.

Therefore, a hard enquiry on your credit report indicates that you have recently applied for credit. They serve as a timeline to show when you’ve applied for credit and could stay on your report for two years. Typically, however, they only affect your credit score for one year.

If you have multiple hard enquiries on your credit report in quick succession, then a potential lender or credit provider might think you’re in a bad financial situation in desperate need of finance, regardless of whether this is the case. This could lead to them rejecting your application, as they might feel you’re too risky of a borrower. This is why it’s important to limit your hard enquiries.

Too many types of credit

The subtleties of your credit score can be confusing and keeping your score healthy can be a delicate balance. Whilst you need to have had some kind of credit in your life in order to have a credit history and credit score, having too much, however, can work against you.

Similar to having too many hard enquiries on your credit report, having too many lines of credit can make it appear as if you are in financial distress. If you have multiple loans or multiple credit cards, it could give off the impression that you are struggling financially, or you’re not able to effectively manage your finances. 

This could make a lender or credit provider deem you as a higher risk and make them less likely to lend you money or increase your interest rates to hedge against the perceived risk. One way you could counteract this is by only taking on finance when you need it, and if you are already repaying off one loan, to not take out a second, for example.

If you’re unsure what’s the best course of action for you, you can reach out to a financial counsellor. They can help you make informed financial decisions that are the most suitable for your current circumstances.

Consolidate your debt

If you have multiple loans or debts from different sources, you may be able to consolidate them into one loan. This could save you money as you only pay interest on one loan and will make it easier to manage your repayments. Instead of remembering multiple dates, you only need to keep track of one. 

The benefits of debt consolidation are numerous, such as simplifying your repayments, reducing your cost to maintain your debts, and having more control over when you can become debt-free.

However, before consolidating your debt, there are a number of things you should consider and check first. Whilst there are numerous benefits to consolidating your debts, sometimes, it may cost you more if you end up with a higher interest rate or have to pay fees.

You should compare the interest rate of the new loan, and find out whether there are any fees or additional costs, against your current loans. If the new consolidated loan ends up being more expensive than your current loans, then it might not be worth it and better to keep things as they are!

Some fees you should keep an eye out for include: penalties for paying off your original loans early, application fees, legal fees, valuation fees, and stamp duty. 

Another thing to watch out for is switching to a loan with a longer term. Although the interest rate might be lower than what you’re currently paying, if you have a longer repayment period, then you might end up paying more in interest and fees in the long run!

New Year, New Me: make 2021 your year

A new year can give you the perfect opportunity to reset and start anew. Make 2021 the year that you look after your credit score, and take control of your financial future. It’s never too late to start, and your friends here at Tippla are here to help you!

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.

5 Achievable Credit Score Goals for 2021

credit score goals

We’re all about setting realistic goals. We’ve compiled a list of achievable and actionable goals to help you improve your credit score and enter the New Year on the right footing.

credit score goals

2021 is just around the corner. We are so close to officially saying goodbye to 2020 and hello to a new year, which will hopefully be a lot better than this year (we’ve set a low bar, we know)!

One way we can make next year better than the last, regardless of COVID-19, is by getting on top of our credit score and working to improve our rating. Although it will take time and effort on your part, it’s actually a lot easier than you think!

But what if you’re not a goal setter? Or you find it hard to stick to goals? We’ve all been there. We get a surge of motivation and create these grand plans to change our life. Whether it’s actually going to the gym more, eating healthier, or cutting back on expenses – whatever it is, in the moment it feels totally achievable. But then reality sets in, we lose our motivation, and we find ourselves falling back into our bad habits. 

Setting SMART goals

If this has been you, you’re definitely not alone. The goal is admirable, but it falls apart at the execution. So what’s going to be different this time around? We’re going to be SMART about it.

By SMART, we don’t just mean setting intelligent goals but setting goals that are clear and tangible. Specifically, SMART stands for:

SMART budgeting

Look at it like this – “getting rich” is not easy to achieve. “Having $500,000 on my savings account by the time I’m 50” sounds more tangible but still makes it hard to know what to do. A SMART goal would be something frequent and time-restricted such as “saving $1,000 each month”. This type of goal gives you a direction of what to do and an appropriate time frame you can work with. 

Setting arbitrary goals such as “I want to go to the gym more” or “I want to eat less junk food”, whilst well-intentioned, are arbitrary goals. This makes them hard to commit to and you may struggle to feel a sense of achievement. The more specific your goals are, the easier it is to measure your success and to keep yourself motivated and accountable. 

It’s also easier to break down your ultimate goal. In this case, your ultimate goal is to improve your credit score. But that doesn’t just happen on its own. So you can create multiple SMART goals that will help you reach your ultimate goal.

With this in mind, what are some SMART goals you can set that will help you improve your credit score? 

Check your credit score on a regular basis

Let’s start off with an easily achievable goal – checking your credit score on a regular basis. On Tippla, your credit score updates on a quarterly basis. This means every three months your credit score might rise or fall. If you have opened new credit accounts during this period, then these will appear on your credit report, and any adverse or positive credit behaviour will be shown on your report and reflected in your rating.

As we highlighted in a recent article, checking your credit score frequently will help you see exactly what influences your score – both good and bad. If you see your credit scores drop, then you could take steps to rectify the situation in a swift manner, reducing the duration of the impact on your rating.

Look out for mistakes

Not only that but if you check your credit score, you’re more likely to catch any mistakes on your report early. 1 in 5 credit reports have some kind of mistake on them. Wrongly listed information could cost you valuable points. That’s why it’s important to check your information frequently to catch mistakes early on.

So how could you make this a SMART goal? Instead of just saying, “I’m going to look at my credit score whenever I remember”, you could instead clearly outline your goal. An example of this could be: throughout 2021, starting from the 1st of January, “I am going to check my credit score every quarter as my report updates”. 

To make sure you stay on track, you can put alerts on your calendar, phone, or find some way to remind yourself of your goal (post-it notes throughout the house also work!). You’ll be able to measure your progress based on whether you have checked your credit score and report in March, June, September and December, as an example.

Implement a budget

If you’re like us, then you’ve probably tried to set a budget numerous times. Whilst you started off strong, once the motivation wore out, you strayed from your budget more and more until you were back to your bad habits (snacks are life).

Unfortunately, it’s often the little things that add up. Ask yourself, do you know what you spend your money on? You may be getting $80 worth of snacks every month without even noticing (we’re guilty of this!)

This is where a budget comes in handy, as it helps you dictate where your money should go instead of spending without thinking. Specifically, a budget can help you reach your financial goals, ensure you have enough money to pay your bills, keep track of your debt repayments, and help you save money for your future self.

What is a budget?

So, what is a budget? A budget is a plan for your finances that spans across a defined period of time such as weekly, monthly, or even yearly. Your budget takes into account your incoming and outgoing expenses.

Your incoming funds can range from your salary, interest from investments, money from your side hustle, or any other way that you make money. Your outgoing expenses is what you spend money on, which can be divided into three separate categories – fixed expenses, variable costs, and savings. Assets, liabilities, and a range of other things can also be included in your budget, depending on how detailed you want to get.

Making your budget SMART

How can you actually stick to your budget and make it into a SMART goal? Firstly, you need to have a defined goal for your budget. Do you want to save a certain amount of money, reduce your spending in one area, such as cutting back the number of coffees you buy each week, or build an emergency fund?

All of these are great reasons, and there’s plenty of other ones out there. Once you know why you are setting a budget and what you want to achieve, then it’s much easier to stick to. Remember your goal needs to be specific. So maybe your ultimate goal is to have an emergency fund of $1,000, then your SMART goal is to set aside $100 each week after paying off all your fixed expenses. This budget would then last for 10 weeks, and at the end, if you stick to it, you’ll have met your goal!

Limit your hard enquiries

When it comes to your credit report, there are two types of enquiries made – soft and hard. A soft enquiry does not impact your credit score and generally occurs when you check your own credit score or when a promotional credit offer is provided to you.

Hard enquiries, on the other hand, are done when you apply for some form of credit, such as a loan or credit card. Your chosen credit provider will take a look at your application and, in order to assess how risky of a borrower you are, will look at your credit score.

Therefore, a hard enquiry on your credit report indicates that you have recently applied for credit. They serve as a timeline to show when you’ve applied for credit and could stay on your report for two years. Typically, however, they only affect your credit score for one year.

If you have multiple hard enquiries on your credit report in quick succession, then a potential lender or credit provider might think you’re in a bad financial situation in desperate need for finance, regardless of whether this is the case. This could lead to them rejecting your application, as they might feel you’re too risky of a borrower. This is why it’s important to limit your hard enquiries.

Keep old accounts open

Another goal you could have for 2021 to help your credit score is keeping your credit accounts open, even if you’re not using them. This is because accounts that have been open for longer may have a higher weight because they showcase your credit behaviour over a more significant period of time. 

It seems contradictory at first to keep too many open credit accounts. However, the age of an account can contribute positively to your credit score. Paying your credit bills of a specific account consistently showcases that you have been capable of dealing with this credit account for a long time already – a good indication for a future credit provider that you are likely to handle credit well. 

Not only is this goal quite easy to achieve, but it could be beneficial for your credit score. This is a win-win situation for us!

Develop good credit habits

One goal that could be super beneficial for your credit score is to develop good credit habits. However, this isn’t a SMART goal, as it doesn’t meet the criteria. In order to maximise your success, let’s break this down a bit

Firstly, let’s go over what some good credit habits could be. There are so many things you could do that could be beneficial for your credit score, such as paying your bills on time, only taking on credit you can afford, budgeting, spacing out your credit applications and more.

So now we have a list of ideas, how can these be made into SMART goals? Perhaps instead of selecting “paying your bills on time”, your goal could be to know what all your outgoing fixed expenses are – such as rent, groceries, utilities, etc, and knowing exactly how much you need to cover these expenses. 

Say your total fixed expenses total $600 a week, as an example, your SMART goal could be: when you get paid, make sure $600 is set aside each week to go towards these costs. Alternatively, you could set yourself a goal to automate all of your payments or change them all to direct debits, on top of ensuring you have enough money in your account each week.

Be SMART in 2021

There are a number of things you can do to start 2021 off on the right footing when it comes to your credit score. You could try and set SMART goals when it comes to your credit, such as creating a budget, checking your credit report every 3 months, keep old credit accounts open, and develop healthy credit habits.

All of these and more could be just what you need to make 2021 your year (surely it can’t be worse than 2020 – right?). So, what are you waiting for? Sign up to Tippla and take control of your financial situation!