Knowing your credit score – and having a good one – is crucial to your financial health, especially right now with interest rates and the high cost of living.
However, according to Salt&Lime, two thirds of adults are unaware of their credit score, despite 79% having at least one credit product.
If you don’t know your credit score, read on to find out how you can access it. If you do, and it’s not looking good, we’ve provided some smart tips on how to improve your credit score and why it matters.
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Your credit score is a figure that represents your track record in applying for, borrowing and paying back credit or financial products, such as loans. Its purpose is to give people an idea of whether or not you’re a reliable borrower.
Your individual credit score sits somewhere on the scale of zero to 1,200. In general, the higher the score, the better your credit rating – and vice versa.
Knowing your credit score can help you understand how much or little a lender might lend you and why, which is important if you need to access cash.
Your credit score is calculated by credit reporting agencies that look at your personal information and credit history. This includes:
Here in Australia, we have three main credit reporting agencies: Equifax, Experian and illion. Each has slightly different ways of calculating your score. So, essentially, you have three credit scores!
While your credit score varies slightly between agencies, what’s considered a good credit score generally falls within a similar range.
According to comparison site Finder, a good credit score can be anything above 500, depending on which of the three credit reporting bodies—Experian, Equifax, or Illion—you get it from. Here’s the breakdown by agency:
A credit score above 700 is generally considered ‘Very good’, and above 800 is considered ‘Excellent’.
A good credit score matters because you’re more likely to have an application for a credit or loan approved if you have one.
It can also impact how much they’re willing to lend you, the interest rate they charge, and other credit or loan terms. For example, you may get reduced security deposits on rentals or better mortgage or car insurance rates.
Better interest rates mean you spend less money paying off your loans and have lower monthly repayments. They also make managing your debt easier, which leads to a more positive cycle of being able to pay off debt, helping you access further credit.
Your credit score can even affect your chances of getting a job, as some companies look at it to get a clearer picture of who you are.
Credit reporting agencies must give you free access to your consumer credit report once every three months. You can also request a copy if:
In addition, you can check your credit score on free sites, including Credit Savvy and Clear Score. To access it, you’ll need to confirm some basic personal information, including your name, date of birth, address and driver's licence number.
Your credit score isn’t fixed. It reflects your situation only at a time a check takes place. One slip-up can reduce it.
Because it changes, check your credit score quarterly, every six months, or once a year, depending on your financial situation. If you’re financially struggling, it pays to keep a more regular eye on it.
It’s also a good idea to check your credit score in the following instances:
There’s no doubt that your credit score matters, but what can you do if you check your credit report and the number isn’t looking good? Here are our top tips:
Without action, a poor credit score, according to Experian, can last between two and seven years depending on the reason, as follows:
However, by making payments and following our other tips, you can improve your credit score sooner. So check and start upping your credit score today!
If your credit score isn’t looking good and you’re struggling to make payments to improve it, get in touch with our team of debt solution specialists today on 1800 534 534 for professional, non-judgmental support and advice.