What is a ‘good’ credit score?

Wrapping your head around credit scores and credit reports can be daunting at first. How is your credit score calculated? When does your credit score update? And most importantly, how do you rank? We’re here to break down credit scoring and get real about your finances so you’re in the know, and a little bit wiser.

Let’s start with the basics.

What is a credit score?

A credit score or credit rating is a numerical score that represents how trustworthy your reputation is as a borrower.

Essentially, your credit score sums up your financial history or ‘credit behaviour’ (ie. times you’ve paid bills late or if you’ve ever defaulted on a payment) into one number that indicates how trustworthy you are. Lenders, banks, and insurers may use this information to decide if they will lend out money, as a credit score is an indication of how likely they are to be paid back and paid on time.

Where does your credit score come from?

Credit Reporting Bureaus (CRB).

Australia technically uses four credit bureaus:

1. Equifax

2. Experian

3. Illion

4. Tasmanian Collection Service

Let’s focus on the first three (sorry, Tassy). Below is a quick summary of how each CRB categorise their credit scores*.

What factors contribute to credit scores?

A bit like the Colonel’s 11 herbs and spices blend, credit bureaus aren’t one to reveal their secrets. Nobody knows the exact recipe each CRB uses, but it essentially comes down to a few key factors.

  • Recent credit behaviour & enquiries
  • Repayment history
  • Length of payment history
  • Type of credit
  • Debt burden

What is a good credit score?

The bands used by the CRBs are a pretty good place to start when assessing how good your credit score is. That’s because they take into account credit scores across the total credit active population. Credit scores are used and viewed by different lenders in different ways, however an easy way to look at it is – the higher the score the better.

The thing to remember is that your credit score can change over time and how it changes is over to you.

How long does a ‘bad’ credit score last for?

Let’s start with the good news. Your credit score is always changing based on your financial behaviour which means you can actually improve your score with some good behaviour. The not-so-great news is that defaults and ‘bad’ marks against your credit score can stay on your file for 5-7 years.

Staying on top of your credit standing is important so you can feel confident knowing that you have access to funds when you need it. WisrCredit Bootcamp can give you a step by step guide to get on top of it starting today.

Credit scores come down to responsibility. Being conscious of staying on top of your payments and checking your credit score regularly can help you maintain a good, healthy credit rating.

Positive Credit Reporting

Positive Credit Reporting, also known as Comprehensive Credit Reporting (CCR) has been around for 4 years in Australia. It essentially means that lenders can see more data in your credit report so they can better assess a borrower’s true credit position and their ability to repay a loan.

Why are we telling you this? The benefit of lenders having more comprehensive info about your credit standing means that lenders can make more informed decisions based on your credit behaviour. Having more certainty around your ability to pay back a loan could result in lower interest rates and better financial products. So working hard to keep your credit score in good condition is more important than ever.

How can you find out your credit score?

You’ve come to the right place. Use our free WisrCredit tool to get both your Equifax and Experian score in minutes and in one place.

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If you want to get Wisr about your credit position, check your credit scores for free!

 

Disclaimer: This article contains general information only, and is not general advice or personal advice. Wisr Finance 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.

What the finance is a credit score?

Personal finance can feel about as straightforward as Beyoncé’s hair on a humid day. Less than 30% of Australians have actually checked their credit score from a credit reporting bureau so you’re not alone if you’re wondering what it is and why you should care. We’re here to help you become a little Wisr on credit scores in a way real people can understand. Let’s break it down…

So, what’s a credit score then?

First off, you may have three of them. We’ll cover why a bit later on. So really, the question should be “what are your credit scores?” Plural. Oh, and you might hear them referred to as “credit ratings” as well – same thing.

Right, now that we’ve covered that, your credit scores are numbers that represent your credit risk. They provide a way for credit reporting bureaus to try and quantify how likely, or unlikely, you might be to repay your bills. Don’t freak out – your credit score isn’t the only factor lenders consider, but it is usually one of the main considerations to find out where you stand in your financial behaviours. It’s also easy to increase your score once you know what it is and how to improve it. Nice.

How are credit scores calculated?

The short answer is that every credit reporting bureau has a different way of calculating their score.

The longer answer is that the credit reporting bureaus will look at your credit history and make a determination based on their own algorithms. Unfortunately, the algorithms they use are unavailable to the public for fear of trying to “game the system,” but following good financial practices will help make sure you’re going to land in the higher range of scores. You may also hear the term “credit report” floating around. Credit reports are different to credit scores and are made up of information like: demographics, types of companies you’ve taken out credit with, the amount of credit you’ve borrowed, how many credit applications and/or enquiries you’ve completed and any overdue payments you may have had. Basically, it’s a report of your financial life known as your credit history.

Let’s review:

Credit score (credit rating) = a number calculated from all available information on your credit history.

Credit report = comprehensive collection of your personal and financial details used to determine your credit score.

You can see a general explanation how each credit reporting bureau determines their score on their websites or you can read our Anatomy of a Credit Score article.

What does a credit score mean for you?

Effectively, the higher the score, the better your creditworthiness.

Your credi-wha?
Your creditworthiness is the same as saying how dependable you are to repay your debts. When you’re seen to be more creditworthy, you’re likely to benefit from lower interest rates and being more easily accepted when applying for any more credit. It becomes pretty important when you go to borrow money for a home, wedding, car or any other large purchase.

Why you should check your score

Aside from just knowing where you stand and how easily you might be able to access credit, you’ll also want to be sure no one is swooping in on your identity or making mistakes on your credit report. It shouldn’t happen often, but it does happen.

If your scores aren’t within range of each other, it might indicate you have a mistake on your report or there’s been identity theft. That’s why using a service where you can compare multiple scores is so helpful. If something doesn’t seem right, you should get in touch with the relevant credit reporting bureau to find out what might be going on.

Some ways you could boost your credit score

We have a whole blog post on this subject, but since you’re here, these are a few things you can do to boost your score:

  • Paying your credit card off in full each month or at least making sure you meet your minimum monthly payment
  • Looking into debt consolidation (we can help with that!)
  • Limiting the number of times you hit your credit report with enquiries
  • Paying your rent, utilities and other bills on time
  • Remembering not all lenders are treated the same (e.g. Payday enquiries may be viewed negatively)

Have a look at our 7 Ways to Improve Your Credit Score post for more detailed information.

The bottom line

Many life moments may depend on your credit score, so best to check it out now.

 

Disclaimer: This article contains general information only, and is not general advice or personal advice. Wisr Finance 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.

Five surprising things that can affect your credit score

So you’ve gone and changed your mobile provider for the third time this year to save some cash. Well done you! Or so you thought when you got that extra 2 GB of data each month. In reality, you could be impacting your credit scores.

 

Changing mobile providers is just one of the little-known factors that can hit your credit scores. Here are a few others to keep you all the Wisr.

 

Requesting a credit limit increase

By requesting a credit limit increase, you’re giving yourself access to more credit. Sounds like a perfectly reasonable thing to do if you need it. Each credit card company will handle applications differently but some will do a hard enquiry against your name to determine your creditworthiness.

Your mate taking over your utility bills

We all have some financially responsible friends and we all have those that, well… could use a trip to our WisrCredit bootcamp. By leaving a utility bill in your name with a mate, you could be risking missed payments or unresolved issues. These could be recorded against YOUR score!

Parking fines forgotten

Many official unpaid fines are reported so when you let that early morning parking fine go unpaid for too long, you’re looking at a potential black mark against your credit.

Changing house often

Well, indirectly. When you move house, you often change utility providers. Like requesting a credit limit increase, a new utility provider is likely to do a hard enquiry which can impact your credit.

Errors on your credit report

Your credit reports are compiled with information from multiple sources. Chances are, there’s going to be an error from time to time. An error on your credit report can significantly impact your score if the information is negative in nature. The good news is Australians are entitled to a free credit report once annually to spot errors like these!

 

If you want to get Wisr about your credit position, don’t forget you can always check your credit scores for free!

 

 

Disclaimer: This article contains general information only, and is not general advice or personal advice. Wisr Finance 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.