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.
- 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.
- 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.
- 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.
- 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.
- 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.