You have likely heard the term credit score, but did you know that the way banks measure your credit score has changed recently?
Previously, Australia only tracked negative credit events however as of 2019 positive events are now also visible under ‘comprehensive credit reporting’ rules. This change provides a more balanced view of your creditworthiness and recognizes your good habits – not just your mistakes.
This change also means you have more power to positively influence your credit score.
Here is a quick reference summary of the most common ways you can hurt or help your credit score.
Before deciding whether lending you money, lenders will do a background check into your credit file. The credit score is an overall measurement of your credit history. This helps a lender work out their risk when lending you money.
The credit score is ranked on a numerical scale ranging from 0 to 1200 and is divided into five credit score categories (below average, average, good, very good, and excellent).
The higher your credit score, the more likely lenders will approve your loan, lend you more, or offer you better rates.
If you are planning on buying a home or investment property soon, then you should be keeping an eye on your credit score.
You can access your credit score for free once a year from the agencies below
Your credit report will contain information about your identity like your name, address, date of birth, and driver's licence number. It will also provide a comprehensive list of your credit activity.
If you find your credit score is not as good as you would like, you may be able to clean it up.
While you cannot remove legitimate strikes on your file, you can report errors that negatively affect your credit score. Clerical errors or misunderstandings sometimes result in false defaults, debts listed twice, or wrong loan amounts being stated.
A credit repair service or financial counsellor can help you get your credit score back in line.
Another thing you can do to improve your credit score is to reduce your credit card limits, pay off any personal loans, and show 6 months or more of no defaults or late payments.
While you may not be able to get a squeaky-clean record, you could bump yourself up into a better credit score band.