A Guide to Checking and Understanding Your Credit

Credit reports, credit scores, soft and hard inquiries, debt-to-income ratios… it’s confusing out there, we know. We’re here to help you get wiser about your credit, which means understanding the basics through to being aware of new rules and legislation that affect credit reporting in Australia. 

It’s important to wrap your head around this stuff and build a healthy credit score because it can save you money in the long run and make it easier to secure funding when you need it most. 

How to understand your credit score 

Your credit score, put simply, is a number that demonstrates how well you manage your finances. It helps a lender determine how creditworthy you are. Credit providers such as banks and lenders use your credit score to determine whether or not it’s a good idea to lend you money, as well as how much money is safe to lend you. The score can also determine your interest rate

How credit bureaus calculate your credit score 

Each credit bureau collects your personal and financial information and details it on your credit report. They take all of this information and come up with your credit score. These factors include but are not limited to: 

  • Your personal information such as your name, address, date of birth, etc
  • Your total amount of credit already borrowed
  • The types of credit providers you’ve had experiences with, such as utility companies or banks
  • Whether or not you have any overdue, unpaid or defaulted credit or loans 
  • The amount of credit enquiries and applications you have on your record
  • Whether or not you have made debt agreements in the past, or any other agreements related to filing for bankruptcy

Australia has four main credit bureaus: Experian, Equifax, illion and the Tasmanian Collection Agency.

What your credit score means

Since each credit bureau uses a different scale to report your credit score, you’ll end up with a number from zero to either 1,000 or 1,200. Keep in mind that you may have multiple credit scores, and WisrCredit will present you with your Equifax and Experian score. Both scores use a five-tier grading system, covering categories similar to below average, average, good, very good and excellent. Where your credit score falls in this range helps financial institutions decide how risky it is to lend money to you. 

They include:

  • Excellent – An excellent credit score means that it is very unlikely that you will get into any trouble that could drop your credit score in the next year. 
  • Very Good – A very good credit score means that it is unlikely that you will get into any trouble that could make your score slip. 
  • Good – A good credit score means that it is slightly more unlikely than likely that you will get into trouble with your credit in the next 12 months. 
  • Average – An average credit score means that it is likely that you will have issues with your credit in the next year. 
  • Below Average – A below average credit score means that it is extremely likely that you will get into trouble in the next year.

How to check your credit score 

Did you know that you can check your credit score for free, and as often as you want? One of the fastest and easiest ways to get your credit score is to use WisrCredit

You only need to provide limited information such as your full name, date of birth, drivers licence so we can ID you and some additional personal information such as your living arrangements.

Get your info ready and give it a crack! 

How to build good credit 

Building your credit isn’t something that will happen overnight, but don’t let that get you down. You can take small steps over time to improve your score. Change starts with understanding your score and its movements.

Your credit score can fluctuate depending on your activities. In some cases, your score can change even if you haven’t done anything at all. Weird, right? Factors that could cause your credit score to rise or drop include: 

  • You applied for credit cards or a new loan
  • Something expired and fell out of your credit reporting period
  • Your credit limit changed on a credit card or loan 
  • You closed out a line of credit or loan
  • A creditor added some new information 
  • You fell behind and made late payments
  • You defaulted on your payments 

To improve your credit score, you want to take a good, hard look at your financial situation. You can identify problems and look for ways to fix them. Once you get a hold of your finances, your credit rating should go up. The more it goes up, the more likely you are to be approved for your next credit card or loan. Other things that can help you raise your credit score include: 

  • Consolidating multiple credit cards or loans onto one credit card or loan
  • Limiting how many times you apply for credit in a two-year period
  • Lowering the amount of money you spend out of your available credit
  • Making all of your payments on time or before the due date
  • Paying your rent on time
  • Paying your mortgage payment on time
  • Paying your credit card balance off in full each month (this also helps you avoid interest charges)

How Comprehensive Credit Reporting (CCR) affects your credit scores

Banks are now required to add more information to your credit report thanks to Comprehensive Credit Reporting (CCR). This helps lenders see the bigger picture in regards to your credit history so they can make more informed decisions. 

The newest additions to your credit report include: 

  • The types of credit lines you’ve opened in the past two years
  • The amount of money you are repaying 
  • Your repayment history over the last two years

Are you ready to get your credit moving in the right direction? Check your score.

Disclaimer: This article contains general information only, and is not general advice or personal advice. Wisr Services Pty Ltd does not recommend any product or service discussed in this article. You must get your own financial, taxation, or legal advice, and understand any risks before considering whether a product or service discussed in this article may be appropriate for you. We have taken reasonable efforts to ensure that the information is accurate at the time of publishing, but the information is subject to change. We may not update the article to reflect any change.

 

5 Solid Reasons to Know Your Credit Score

Most people don’t think about their credit score until it’s too late. Maybe you tried to apply for a vehicle loan or a credit card and the lender turned you down. Or, you applied for a home loan and were told you’d have to pay a higher rate due to your poor credit… #feels. 

Here are a few reasons to keep on top of your credit so you can avoid similar blows in the future. 

Defining a Credit Score

Let’s recap. Your credit score is based on several factors, such as your personal information, enquiry history, repayments, existing lines of credit and more. Simply put, your credit score is a numerical representation of how responsible you are with credit. Lenders look at all of this information when considering you for a personal loan, mortgage, credit card or another line of credit to decide whether or not you’re an acceptable risk. 

How is your credit information recorded?

Who keeps tabs on all this financial information? Your work? Banks? The government? Nope, a credit bureau. In Australia, there are technically four credit bureaus. When you’re a customer of a business that provides credit, they are bound by an agreement to send your transaction information to the credit bureaus. The credit bureaus use this information to update your credit score accordingly. Loan or credit card activity updates every month – which is why it’s a good idea to check it on a regular basis.

More reasons to check your score…

At the very least, you should make it a priority to check your credit score at least once a year. If you’re feeling super-duper responsible, you can check it every month. WisrCredit is a completely free platform that lets you check multiple scores (yes, you have multiple) whenever you want, without any dings to your credit file.

  1. Give yourself something to build upon

Knowing exactly where your credit score stands can give you a solid foundation to start building from. It will also give you a good idea of which financial avenues are available to you since most lenders only accept credit scores within a certain range. Once you know how you rank, you can take steps to improve your credit score if needed.

  1. Protect against fraud

Okay, touch wood this doesn’t happen, but when credit card fraud or identity theft occurs, you need to act quickly. The longer you delay reporting the crime, the harder it becomes to secure a conviction. Checking your credit score on a regular basis can help you catch any fraudulent transactions almost instantly. This will in turn help to minimise any damage such activities do to your finances. 

  1. Improve accuracy levels

Your credit report can include inaccuracies that drag your credit score down through no fault of your own. If you check your score and it is much lower than you expected, go through your report carefully and thoroughly. You should report inaccurate information to the credit bureau so they can remove it from your credit report.

  1. Minimise enquiries

When you apply for a loan, mortgage or a credit card, the lender will do a soft or hard enquiry on your credit report. Lenders don’t generally like to see too many hard enquiries on your record, and they stay on your credit report for two years. Knowing your credit score (a soft inquiry) means you can be more realistic about applying for credit, minimising the need for too many enquiries. 

  1. Quick responses to changes 

Maybe you’re not entirely sure what causes your credit score to fluctuate. Monitoring your credit score lets you see what can factor into those changes. For example, it may drop a few points if you use too much of your credit card balance. Knowing this helps you correct your behaviour and helps your credit score even out.

Ready to check your credit score? Get it done here.

Disclaimer: This article contains general information only, and is not general advice or personal advice. Wisr Services Pty Ltd does not recommend any product or service discussed in this article. You must get your own financial, taxation, or legal advice, and understand any risks before considering whether a product or service discussed in this article may be appropriate for you. We have taken reasonable efforts to ensure that the information is accurate at the time of publishing, but the information is subject to change. We may not update the article to reflect any change.

So, what is Comprehensive Credit Reporting (CCR)?

It’s officially July! You know what that means. Chilly weather, faux Christmas parties, and you guessed it, Comprehensive Credit Reporting. Okay, you might not be as excited about the latter as we are — but it’s worth being across since your finances are about to be impacted.

What is Comprehensive Credit Reporting (CCR)?

Comprehensive Credit Reporting (CCR) — also known as Positive Credit Reporting — means that banks and lenders can now see more data in your credit report when deciding whether or not you’re able to repay a loan or other lines of credit. 

That sounds a little bit scary, but it’s actually a pretty good thing.

Up until 2014, lenders had limited access to your credit history. They could only see whether you had any negative information (ie. credit enquiries, overdue debts, defaults, bankruptcy etc) on your credit report. This focus on negative actions made it harder for people with good credit to be seen as trustworthy borrowers since lenders only had access to limited information. 

Now, positive aspects of your credit report are being added—hence the name Positive Credit Reportingto give banks and other lenders a bigger picture of your finances. 

With CCR coming into effect, the newest additions to your credit report include:

  • The types of credit you’ve opened in the past five years
  • Up to 24 months of repayment history
  • Dates credit accounts were opened and closed
  • The credit limits for credit cards and values of loans obtained

Still with us?

The benefit of lenders having a deeper understanding of your credit history means that they can make more informed decisions about your overall financial position. Having more certainty around your ability to pay back a loan could result in lower interest rates and better financial products. 

CCR also allows borrowers with a strong repayment track record to gain better recognition from lenders based on their good behaviour. 

So… is CCR officially in effect? 

Technically, CCR has been in place since 2014, but only recently became mandatory for Australia’s Big Four banks, who were required to share at least 50% of their data within 90 days of 1 July 2018.  They now need to share 100% of their data within 90 days following 1 July 2019. This is part of a bigger push towards open banking in Australia, and Comprehensive Credit Reporting is just the first step. 

Here’s what the government had to say:

 

 

According to the Federal Government, “this measure will give lenders access to a deeper, richer set of data enabling them to better assess a borrower’s true credit position and their ability to pay a loan.”   

Is CCR a good thing for everyone?

Although CCR brings many benefits, it’s not sunshine and rainbows for everyone. There is a chance that with CCR in full effect it could have a negative impact on your current credit scores, especially if repayments have not been made on time. The best way to find out is to check your credit scores across the different Credit Reporting Bureaus. And with WisrCredit, you can get your Equifax and Experian score in the one place.  Go to WisrCredit here.

How Comprehensive Credit Reporting may affect your credit scores

With more visibility into your repayment history and credit obtained, it’s more important than ever to maintain good financial habits. With great power comes great responsibility, right?

Here are a few best practices to keep in mind:  

1. Pay your bills on time. 

Automate, automate, automate! 

2. Don’t apply for credit that you know you can’t get.

Check your credit score on a frequent basis so you understand your borrowing power and can start to see what is impacting your score – either positively or negatively.

3. Keep your debt under control. 

We have an app for that.

…and that’s CCR in a nutshell. Good on you for getting this far! Keep an eye out for mentions of open banking in the news since this is only the beginning. 

 

Disclaimer: This article contains general information only, and is not general advice or personal advice. Wisr Services Pty Ltd does not recommend any product or service discussed in this article. You must get your own financial, taxation, or legal advice, and understand any risks before considering whether a product or service discussed in this article may be appropriate for you. We have taken reasonable efforts to ensure that the information is accurate at the time of publishing, but the information is subject to change. We may not update the article to reflect any change.