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How to Check My Credit Score in Australia

how to check my credit score in australia

 

How to Check My Credit Score in Australia

Getting started: What is a credit score?

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

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

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

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

 

Equifax Score

Experian Score

illion Score

Excellent

833 – 1200

800 – 1000

800 – 1000

Very Good

726 – 832

700 – 799

700 – 799

Good

622 – 725

625 – 699

500 – 699

Average

510 – 621

550 – 624

300 – 499

Below Average

0 – 509

0 – 549

0 – 299

Why should I check my credit score?

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

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

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

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

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

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

3. It can help protect you from fraud

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

When should I check my credit score?

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

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

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

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

Ways to improve your credit score

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

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

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

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

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

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

Things that hurt your credit score

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

1. Not paying your debts on time

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

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

2. Making too many credit applications

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

3. Making payday lender enquiries

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

4. Having no active credit

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

5. Maxing out your credit card

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

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

6. Refinancing/balance transfers

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

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

What’s included in my credit report?

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

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

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

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

How much does it cost to check my report?

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

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

Knowing where you stand

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

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

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

Introducing: Tippla

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

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

Harness this pocket-sized power, sign up today.

 

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

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What is a Good Credit Score? Getting Your Credit to Work For You

what is a good credit score
What is a good credit score

 

What a good credit score can get you

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

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

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

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

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

How to get a good credit score

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

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

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

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

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

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

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

How to build credit

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

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

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

1. Practise good credit habits

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

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

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

2. Check your scores and reports

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

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

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

Meet Tippla

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

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

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

Tippla – for smarter credit checks

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

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The Five Biggest Factors That Affect Your Credit

the five biggest factors that affect your credit

The Five Biggest Factors That Affect Your Credit

Credit scores – we’re often told we should be working to improve them. Why? Because with a good credit score, we’re not only able to borrow more but we’re generally offered better interest rates.

Few of us can go through life without using credit at some point, so it always makes financial sense for us to improve our credit score wherever possible. But where do you start?

A number of elements affect your credit score, but there are five things that credit reporting agencies will take into account the most. These include your bill payment history, your level of debt, your credit history age, the number of enquiries that have been made on your account, and the types of credit on your report. So, let’s jump in and take a closer look at these factors in greater detail.

1. Payment History

How well do you manage your finances? A lender can get a pretty good idea just by looking at your payment history. If you think about it from their perspective, someone regularly paying their bills is a good indication of whether they could handle future loan repayments. 

Accounts that are recorded on your bill payment history include credit lines, personal loans, and mortgages. Recurring payments like apartment rentals, electricity bills, or office maintenance aren’t typically recorded on your payment history. Yet, when you fail to pay those bills and they are turned over to collection agencies – this will usually be recorded, hurting your credit rating.

Late repayments

Even the best of us forget to make a payment from time to time. A one-off missed payment might not mean much in the grand scheme of things. Yet, a lot of overdue payments will definitely be a red flag for potential lenders. It’s also suggested that around 35% of your credit score is calculated from your bill payment history. So, fail to keep on top of your debts and your rating will definitely suffer the consequences.

If you’re wondering how much a late payment might have cost you, the effect a late payment has on credit rating depends on a number of factors:

  • How late were the payments made? A late payment that was unpaid for months is considered worse than one that is repaid within 30 days.
  • How many late payments have you had?
  • How much was owed?
  • How long has it been since you last had a late payment? Years-old late payments are less concerning to credit agencies than recent issues.

Late payments can be reported to the credit reporting agencies after 30 days. In practice, this is often left to much later, so you might have gotten away with it if you’ve forgotten a bill here or there.

Positive credit reporting

New rules introduced in July 2018 mean that some of your good financial habits may also be reported to credit agencies now. So, there are even more incentives to keep up with your good financial habits!

2. Debt Level

Feel like you’re running a lot of debt? You’re not alone. Australians have one of the highest debt-to-income levels in the world. Debt plays a big part in modern life. It not only affects our ability to spend, but with the amount of debt we have making up around 30% of our personal credit score, it also controls how much we’re able to borrow. These are some things to keep in mind when it comes to managing how your debt levels impact your credit score:

Credit Utilisation

Credit utilisation is the ratio of how much you are in debt compared to your credit limit. You might have a high credit limit, but if your utilisation of that credit is high, your credit score suffers.

Things get particularly bad when you over-utilise credit by maxing out a credit card or going over the limit. On the flip side, paying off a loan early will lower your credit utilisation and improve your credit score.

Debt-to-Income Ratio

Another factor to consider is how much debt you have in comparison to your income. While this doesn’t typically affect your official credit score, banks and lending establishments will certainly take it into account when considering whether to offer you a loan. Again, high levels of debt will affect your ability to borrow more. So make sure you’re not overdoing it!

3. Credit History Age

Credit rating agencies only have a few figures to work with when calculating whether you are a credit risk or not. The longer you’ve held good credit, the more likely it is that you’re able to handle it sensibly.

As a result, it can sometimes make financial sense to keep an account alive but dormant even if you don’t use it. It’ll remain on your credit report as an example of how many years you’ve been able to keep your credit in good standing. It pays to check whether there are any dormant account fees though, as this might end up only adding to your troubles down the line.

4. Number of Inquiries on the Report

An interesting factor that affects your credit score is the number of enquiries made into it. Credit enquiries can remain on a report for two years, but it is the most recent credit enquiries that can temporarily cause your score to drop.

Every time you apply for credit, you’re essentially saying that you don’t have enough money for something you want to buy. Everyone’s in the same boat, but if you make too many of these enquiries in short succession, it can signal to the lending agencies that you’re in some kind of financial bind. This causes them to lower your credit score.

This system is also used to help mitigate the potential problem of someone applying for a lot of credit from multiple lenders at the same time.

You’re savvy if you get quotes from multiple providers, but if you like to shop around for deals you should be particularly wary that multiple enquiries could mess up your credit score for up to a year.

Soft Enquiries vs. Hard Enquiries

It’s important to note that not all enquiries into your credit report have the same impact on your actual score. There are two types of enquiries a lender can perform on your credit – a soft enquiry and a hard enquiry.

A soft enquiry is used to get a high-level idea of your financial status. So, while they can be noted on your credit file, they won’t affect your credit rating.

A hard enquiry, on the other hand, is when a lender pulls your complete credit report. Such enquiries will definitely be reflected in your credit report. So, it’s best you avoid hard enquiries where you think you might be rejected for a loan. After all, a long list of rejections doesn’t look too great on a credit report either.

5. Types of Credit on the Report

Having a number of different types of credit can be good for your credit score. It has a small positive effect because it shows you are capable of managing a number of different credit accounts.

This is more of a factor when you’re just starting out financially and looking to build credit. A completely clear credit report that doesn’t show any kind of credit activity makes us a bit of an unknown to lenders, which represents a bigger risk to them. They are unlikely to offer us a large amount of credit. Opening a few different lines of credit and managing them efficiently improves a credit score quickly.

Key takeaways

In a nutshell, the most important factors when it comes to your credit score are your current debt levels and your bill payment history. How long you’ve held credit, the number of different types of financial products you’ve used, and the number of recent inquiries on your report also play a smaller role in determining your credit score and how much you’re able to borrow.

Tippla, for smarter credit checks

Looking to get the most out of your credit score? For no cost whatsoever, you can gain an intuitive insight into your credit score with Tippla. With our smart monitoring and insights, we can help you reach your financial goals in no time.

Get your financial well being on track, sign up to Tippla today.

 

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

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How to Understand Your Experian Score

how to understand your experian score
How to understand your Experian score

The key to your financial development

The fact is, unless you’re the heir to a healthy trust fund or the winner of a million-dollar lottery, there are certain things in life that you simply can’t afford to pay for upfront. Things like a home, a car, and an education just don’t come cheap. So, chances are there will come a time when you find yourself needing to borrow money. 

Lending money or offering credit is a game of risk for banks and financial institutions. They need to know how likely a borrower is to pay that money back. To do this they employ credit reporting agencies, who offer up a simple number of three or four digits called a credit score.

A credit score is basically a borrower’s risk to a lender, represented in a number. While it’s not the only factor that a lender will take into consideration when determining whether a loan or credit card application is accepted, it’s often the defining one. Understanding your credit score can consequently give you the power to improve it and your overall financial position.

But in spite of its importance, most people don’t really understand their score – what it is, why it matters, and how it came to be. So today we’ll be looking at everything you need to know about your Experian score. That is, the number generated by one of Australia’s three major credit reporting agencies (the others being Equifax and illion).

What do you need to know about your Experian score, and how do you get it working for you rather than against you? Let’s take a look.

Experian credit scores 101

Credit scores are designed to represent the financial responsibility of an individual and the risk they represent to a lender – in a number. After an individual’s financial history has been analysed, a number is assigned that ‘predicts’ the likely outcome of a loan or credit card over the next 12 months. So, whether repayments will be made or missed, whether a loan will go into default, or whether something more serious like bankruptcy will occur. That’s quite a lot for one single number.

Based in Ireland, Experian is one of the largest credit reporting agencies in the world, collecting and analysing the financial information of over one billion people worldwide. An Experian credit score is given on a scale of 0 to 1000 – zero being the worst possible score and 1000 being the best.

While your score will play a key role in whether a loan or credit card application is approved, it’s important to note that isn’t the only factor at play. Your relationship with the lender and other pieces of the puzzle will also be considered.

Key contributing factors

So, what do Experian look at when calculating your credit score? According to the agency itself, the score is based on the following five factors:

  • Payment history: How faithful are you with your repayments, whether they’re on a loan or for a credit card? Lenders want to be confident that they can trust you to repay your debts on time, so even one missed repayment will have a negative effect on your score. According to Experian, this is the most heavily-weighted factor, accounting for as much as 35% of your score.
  • Credit utilisation: Another major factor in creating your credit score, accounting for up to 30% of the final number, is your credit utilisation ratio. This is calculated by looking at the ratio of credit card balances to credit card limits, and the ratio of loan balances to the original loan amounts. The less credit you’re utilising, and the faster you pay down your loan debt, the better your score will be.
  • Credit mix: A lender wants to see that you are capable of handling different types of debt, be it in instalment accounts (loans), revolving accounts (credit cards), or for a variety of different assets – a home or a car, for example. The greater the mix, the better the score, provided it is all regularly repaid of course.
  • Hard enquiries: Whenever you submit a loan or credit card application a lender will request your credit report, and these ‘hard enquiries’ are logged in your credit file. Too many enquiries can negatively affect your credit score, as this can be a sign that you are desperately trying to obtain credit (and failing). 
  • Negative information: Late payments, missed payments, charge-offs, collection accounts, foreclosures, bankruptcies; all of these events are logged in your credit file, and represent red flags to lenders. The degree to which negative information affects your score will depend on the information itself. If it’s something minor like a late payment, its influence will be low. If it’s something major, like bankruptcy, it could devastate your score. 

Why does my Experian score change?

You can see that there are plenty of reasons why your Experian score might change, be they for better or for worse. But some of the most common reasons your score might go up or down include:

  • Cancelling a credit card or paying off a loan: Paying off debt or reducing your financial exposure will generally improve your credit score.
  • Paying a bill or making a repayment late: Not making a payment on time, whether it’s for a credit card instalment, loan repayment, or even phone or utility bill, is perhaps the most common way that credit scores are negatively affected.
  • Submitting a loan/credit card application: If a number of hard enquiries are logged on your file in a short amount of time, it will negatively affect your score. You should only ever apply for one credit card or loan at a time. A recently denied application will also have a negative effect. On the flipside, an approved application will have a positive effect on your score.
  • Making changes to your loan/credit limit: Any change to your current financial arrangements, be it to a credit card, a loan or otherwise, could result in a change in your score.
  • New information is added to your file: Experian has to source all of its data from credit providers, and sometimes those providers take their sweet time in passing that data on. This can see your credit score changing even in periods when you’re not financially active.
  • Old information is removed from your file: At the other end of the process, all data has an expiration date. When this data is removed from your credit report it can either affect your score positively (if it was negative data) or negatively (if it was positive data).

How often does my Experian score get updated?

In short: all the time! New information is constantly added and removed from your credit file, so your credit score could hypothetically change every time you check it, even if it’s the next day.

That said, most of the data on your credit report is updated monthly, so it’s likely that you’ll see minimal change in your score day-to-day, but may see change from month-to-month. This ‘data dump’ usually happens at the beginning of a new month, so aim to check your score at this time if you’re looking for a current and relatively stable measure.

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

Because  many of us will only think about our Experian score a handful of times in our lives, a few of the terms that are used might be a little confusing. First of all this number might be described as either a ‘credit score’ or ‘credit rating’ – there’s no difference. In Australia at least, these two terms mean the exact same thing. True to form, we just like to talk in riddles here.

Slightly more confusing is the difference between a credit report and a credit score. These two things essentially offer up the same information, but in different forms.

  • A credit report is a full overview of your finances, displaying any information relevant to your ability to manage debt and credit.
  • A credit score represents all of the information in your credit report in a single, simple number, which in the case of an Experian score is between 0 and 1000.

What do the different score ranges mean?

So your Experian score is a number between 0 (the worst possible) and 1000 (the best possible). But what does it mean to fall in between? Let’s take a look at how Experian define their score ranges.

Rating Score Reasoning
Excellent 800 – 1000 Your score is well above the Experian average. It is highly unlikely that you’ll experience financial difficulties in the near future, and you’re almost guaranteed to secure credit or gain approval on loans.
Very Good 700 – 799 Your score is above the Experian average. It is unlikely that you’ll experience financial difficulties in the near future, and you should have no problem securing credit or gaining approval on loans.
Good 625 – 699 Your score is around the Experian average. There is a chance – albeit small – that you’ll experience financial difficulties in the near future, so lenders will be more careful when assessing your applications.
Average 550 – 624 Your score is below the Experian average. It is somewhat likely that you’ll experience financial difficulties in the near future, so it may be more difficult for you to secure credit or gain approval on loans.
Below Average 0 – 549 Your score is well below the Experian average. It is likely that you’ll experience financial difficulties in the near future, so it will be difficult for you to secure credit or gain approval on loans.

 

I don’t have an Experian score – should I be worried?

A score of zero and no score are two very different things. In order to create their score, Experian has to evaluate your credit and debt history. If you don’t have a history, you won’t have a score.

Most lenders require a borrower to have some form of credit history before they will be willing to approve a credit or loan application. So, you’ll need to put something like a mobile phone plan or a utility bill in your name if you want to generate an Experian score.

If you’re anything like the rest of us, you haven’t won the Powerball or inherited a 40 acre estate. You’ll therefore need to access credit or go into debt in order to make those investments that are so important in life – the house, the car, the education. Because while the words ‘debt’ and ‘credit’ can come with some not-so-sexy connotations, the truth is that they are the most important financial tools at your disposal, allowing you to strengthen your position in a way that your own money never could.

The key to accessing these tools is a simple number between 0 and 1000. And by understanding that number, you’ll be able to get it working for you, not against you.

Whip your credit into shape, with Tippla

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

By comparing your score from multiple credit reporting agencies, we’ll help you understand it more deeply so you can smash your financial goals in no time. 

For smarter credit checks, choose Tippla.

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

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What Are the Consequences of Bad Credit? 5 Ways Bad Credit Could Impact You

what are the consequences of bad credit

What are the consequences of bad credit

Looking out for your financial future    

Bad credit. If you’ve ever looked at applying for some kind of finance then you’ve likely heard the term thrown around. So, what’s all the fuss about? Well, the fact is – managing credit poorly can have severe consequences for future you. 

Why? Well, because finance companies report your behaviour to credit bureaus. If you’ve been good and made your repayments on time, then great! This will be reflected in your credit score. However, if you’ve missed payments and gone into default, it will be negatively reflected in your credit report and this will lower your score. 

Your credit score is one of the most significant pieces of financial information companies will review when assessing your application. So, having a good score is pretty important! A low or bad credit score will often mean you are not seen as ‘credit worthy’ and may lead to you being declined for finance.

It’s not just traditional finance companies that affect and review your credit scores though. The types of companies that access and influence your score are wide-ranging, from telecom to utility providers. So, the consequences of a bad credit score may reach further than you think. 

In this article, we’ve outlined the main problems people face when they don’t manage their finances properly. Keep reading to see how bad credit could impact you and how Tippla might be able to help you get your finances back on track.

5 Ways Bad Credit Could Impact You

1. Loan applications might not be approved.

Having a low credit score can and will impact you financially in more ways than one. Yet, this is probably the biggest issue for most people. Bad credit can affect your chances of qualifying for a new loan or credit application. This is because lenders might consider you a high-risk borrower if you have a low credit score. 

Your credit score is an indicator of how likely it is you’ll be able to repay a debt, with a low score indicating you’re less likely. A lender will see this as ‘high risk’ and may not be willing to approve your loan application as a result.

What you can do to improve your chances

If you want to improve your credit score so that you can qualify for a loan, the key thing to do is keep your finances in order. If you share a bank account with your spouse, you can decide to separate your finances to ensure it won’t affect your credit score. 

On the other hand, if you are a couple and buying a house together, you can buy the home using the name of the person with the best credit. The other option you can consider is finding a co-signer with a good credit score. For instance, some parents may co-sign on their children’s loan or mortgage application to improve their chances of getting better lending terms.

The other way you can positively influence your credit score is by paying all your bills on time. This includes your utilities, phone bill, rent, and so on. If you are late on any payments, you should try and make them current to improve your credit score. You can request a free annual copy of your credit report to see where you stand. That way, you will have an idea on what you can do to improve your credit score. You also need to ensure there are no errors on your credit report as this can hurt your credit score.

2. You’ll likely face higher interest rates.

Qualifying for a short-term loan can feel amazing. Yet when your loan comes with restrictive terms or a high-interest rate, it could soon dull your spirits. The more high risk you are, the more likely your loan will be expensive. By having bad credit or a lower credit score, you may end up paying higher interest rates when you get approved for a loan. A lender will use these to offset the risk, which may lead to pricey monthly payments.

The impact of having bad credit can be enormous, especially when applying for a mortgage. For example, if you have a low credit score or bad credit, your mortgage lender will likely request for a down payment of at least 15 or 20%. This is commonly referred to as “predatory lending” when lenders charge a high-interest rate after you are turned away by several lenders. That’s really the issue with bad credit – you don’t have any bargaining power when dealing with creditors.

How you can combat this

To qualify for better interest rates when applying for a loan, there are a few things you can do. For starters, you can make multiple monthly payments on your card to keep balances down. Alternatively, you can increase your credit card limit. When your balance stays constant and your limit increases, you ultimately reduce utilisation. You can also consider applying for a debt consolidation loan to streamline your card balances into one, improving your credit score. 

You should also resist the temptation of applying for a new credit card to avoid accumulating debt. Your credit score will suffer the moment you start making late repayments. It could take months or even a few years to improve your credit score, which means getting a new credit card is not worth it.

If you experience difficulty making ends meet, you can contact your lenders or find a legitimate credit counsellor. While this won’t improve your credit score immediately, if you can make timely monthly payments on your cards, your score should improve over time. Seeking financial advice from a credit counselling service could also help guide you in the right direction if you’re looking to improve your finances long-term.

3. Insurance premiums will be more costly.

Sadly, bad credit can often lead to higher insurance premiums. Insurance companies typically run a comprehensive credit check when you apply for insurance cover. Your credit history helps to give insurers an overview of how you have managed your finances over the years. Insurance companies are often on the lookout for any red flags that may indicate that you are not qualified to be insured. 

If you have missed on several card payments or you’re deep in debt, for instance, that could indicate you don’t have your finances in order. So, having bad credit could cost you more in premiums or result in your claim being rejected altogether. 

In most cases, bad credit won’t ultimately hurt your chances of getting approved for life insurance. Yet, it may make your insurer think twice about whether you’ll be able to make your premium payments on time.

How you can tackle this issue

Sometimes bad credit might be a result of errors on your credit report, and not from poor financial sources. Therefore, before you start looking for the right insurance cover tailored to your needs, it is essential to scrutinise your credit report for any inaccuracies. If you notice something looks incorrect, initiate a dispute with the relevant credit reporting agency that made that report. They can help you resolve that matter, and that might raise your credit score.

If you want to consider filing for bankruptcy, you may have a difficult time convincing the insurance provider to offer you an insurance policy. In such a scenario, you need to work on improving your credit history before getting an insurance cover. You can apply for insurance once you make positive steps toward repaying your debts.

4. Starting a business could prove more difficult.

If you have bad credit and you want to start your own company, it could throw a spanner in your business plans. Unless you have financing to start with, chances are you’re probably going to need to apply for a loan. This is where things get a little tricky. Getting approval on a loan, whether it’s from the bank or an online lender, is likely to be much harder. 

Most lenders classify someone with a credit score less than 622 as too risky to lend to. Most, but not all. There are lenders out there that specialise in bad credit finance and may have more lax requirements. Some people can start a business with bad credit, so you shouldn’t assume that it’s something impossible to do. Ultimately, it may just make things a lot more challenging, especially if you don’t have experience in running a business.

Improving your situation

To minimise the challenges of starting a business with bad credit, the first step is finding out how you’ve got here. If you have been spending more than you earn, then you might want to consider budgeting. You need to be responsible with your finances to avoid overspending. 

Next, estimate how much you pay for expenses such as groceries, gas, and entertainment. Based on your income, create a limit of what you spend every month. For instance, if you usually spend $300 a month on groceries, you can cut down the cost to $200 a month on groceries by using coupons and avoiding impulse purchases. Budgeting can improve your credit score, and this can improve your chances of getting a loan to start your business. 

Since most creditors are usually unwilling to lend money to people with bad credit, you may also want to consult a financial expert. Showing them your business plan will give you a better understanding of where you stand. A financial expert can advise you on some of the changes you may need to make to improve your credit score. Plus, they’ll likely be able to guide you on how you can get money to start a business even with your bad credit. 

5. You may have trouble getting a mobile phone contract.

Getting a mobile phone contract may sound trivial compared with some of these other points. Yet, since mobiles are such an everyday staple of modern life, most people can’t afford to live without one.

Unfortunately, most phone providers have to scrutinise your credit when determining if you are eligible to get a new contract. Even when you apply for a month to month mobile phone plan, your provider will likely run a credit check. This is important because it’s quite easy to accumulate excessive charges on things like roaming, high data usage, and international calling. 

What you can do if this applies to you

If you don’t qualify for a phone contract due to bad credit, you may still have options but they can be costly. Some mobile phone providers may accept a security deposit similar to applying for a secured credit card. If you make your repayments on time, you can get back your deposit after a year or two. You could also consider getting a prepaid phone, though such plans usually don’t include state-of-the-art phones. They might also have restrictions on data usage and talk time.

The other option you can consider is applying for specific contract packages designed for families. In this scenario, multiple phone lines are connected on a single plan. One main account holder will have to undergo a credit check, but the rest of the users connected on the plan will not. The main risk of getting this contract is that the responsibility for paying the bill solely depends on the primary account holder. That said, it can be a great way to get a good deal on a phone plan since it won’t be influenced by your poor credit history.

Dealing with bad credit

If you’re deep in debt and feel that you cannot solve the problem on your own, you should consider using the services of an expert in debt relief. They can give you guidance on what you can do to improve your condition. 

Remember, it’s easy to get into debt. The trouble is, it takes much longer to bring your score up than it does to drag it down. But regardless of how poor your credit is at the moment, you can always make it better.

You may have overlooked the importance of creating a budget, and ended up spending more than you should. In hindsight, maybe you didn’t need that expensive big screen TV after all. Or, maybe you’ve ended up in a difficult financial situation due to factors beyond your control. 

Whatever the case, stay positive! You can definitely turn things around for the better and speaking with a professional is a great way to get started.

Tippla – for smarter credit checks

Feel like bad credit is holding you back? What if we said you could improve your credit score AND it didn’t have to cost you anything? That’s what you get when you sign up to Tippla!

By comparing your score from multiple credit reporting agencies, we’ll help you understand it more deeply so you can improve your score and reach your financial goals. For smarter credit checks, choose Tippla.

 

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