Your Quick Guide To Credit Scores

Loan Market

Your credit score is a number that represents your history of managing credit; the higher your score, the more creditworthy you appear to lenders.

Your credit score is based on your credit history and calculated using several factors, including how much money you have borrowed, how well you repay your debts and what credit limits you have in place. 

It will also be based on past credit applications and whether you have any bankruptcies, defaults or court judgments in your name.

When applying for a mortgage, your credit score will not only influence how likely you are to be approved, but how much a lender is willing to loan you, the interest rate they offer you and the terms of your loan. So it’s an important figure to know and monitor.

What is a good credit score?

Your credit score is calculated by credit reporting agencies, also known as credit bureaus; in Australia, the three main credit bureaus are Equifax, Experian and Illion.

Each one may have different information about you, calculate your score differently and have different definitions of what constitutes a ‘below average’, ‘good’ or ‘excellent’ score.

You are entitled to a free copy of your credit report every three months.

What makes your credit score rise and fall

Several factors can affect your credit score. These include:

  • How well you keep up with debt repayments.
  • Your credit card limit.
  • How often you apply for credit.
  • How much debt you have, and the type of debt (this includes Afterpay).

How to improve your credit score

If you are looking to improve your credit score, you could consider:

  • Lowering your credit card limit.
  • Paying off high-value debts such as loans and credit cards.
  • Paying outstanding debts. 
  • Limiting credit applications.
  • Paying rent and utility bills on time.
  • Paying your credit card balance in full each month.
  • Checking your credit report every three months for any false negative listings – and then apply to have them removed.

If you want more information about how your credit score may affect a future home loan application, it’s a good idea to speak to a broker.

By Toby Edmunds

Toby Edmunds is managing director and finance broker at Loan Market Razor in Victoria. He has been in the finance industry for over 30 years, including working at Commonwealth Bank. He has received industry accolades including from MPA, The Adviser, Australian Broker Magazine and Australian Mortgage Awards. 

Contact Toby.

The information provided on this site is on the understanding that it is for illustrative and discussion purposes only. Whilst all care and attention is taken in its preparation any party seeking to rely on its content or otherwise should make their own enquiries and research to ensure its relevance to your specific personal and business requirements and circumstances. Terms, conditions, fees and charges may apply. Normal lending criteria apply. Rates subject to change. Approved applicants only. Loan Market | ABN 89 105 230 019 | Australian Credit Licence 390222

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