Today, you will learn how a credit score in Australia works. Then, keep reading to know everything you need about it!

Credit is part of our lives, whether for good or for bad. Actually, it is only a bad thing if you don’t have consciousness of how to use it responsibly.

Of course, everyone takes risks when using credit. Therefore, everyone is subject to sinking into debt.

But the chances are low when you know how credit works and how your creditworthiness affects your finances.

Then, continue reading to find out how credit scores and reports work in Australia.

A credit score is a measure that reflects the creditworthiness of a consumer. It is calculated based on the credit reports of an individual.

That is, every time you apply for a credit card or a loan, for example, transactions will be recorded on your reports.

The same happens for payments. Each time you pay your bills on time, transactions are recorded. But it happens to bad transactions, too. 

For instance, each time you forget to pay a bill, it will be recorded on your reports, as well.

Therefore, credit bureaus or credit agencies analyze the data and calculate a score based on all reports recorded.

Each credit agency works in a different way. However, essentially, all of them have the same basis to calculate scores and distribute them to individuals and businesses.

In general words, a credit score is a number that shows how reliable as a consumer you are. So, the higher the number, the better you look for the market. And your chances of being accepted are higher, too.

In Australia, several credit agencies work to import, analyze, calculate, and distribute the credit data of each individual. 

The largest one is Veda or Equifax, a credit reporting agency that, like any other, looks at your past and present debt, loans and loan inquiries, current credit limit, accounts opened and closed, and credit & store cards.

Let’s focus on Equifax, the largest credit bureau.

Credit scores calculated by this company range from 0 to 1200, as follows:

As you can see, from 661 to 1200 you are considered a reliable consumer. Therefore, your creditworthiness is good.

On the other hand, below 460, it is less likely you be approved for credit at reasonable rates and conditions.

Usually, consumers with below-average credit can access credit solutions. But those solutions will be expensive or less flexible.

Your behavior as a consumer will directly affect your credit score. So, if you are a defaulter, your credit score will be impacted.

If the amount you owe is large, your credit score will be affected more seriously. Also, applying for many credit lines impacts your reports.

Since each application runs a hard inquiry on your credit reports, your score is affected every time you apply for credit.

Furthermore, it applies to credit cards and loans. It is important to mention that your personal details impact your score, as well.

For example, how long you have been employed in the same position or lived in the same address affects your score.

Moreover, the type of lender impacts positively or negatively your credit score.

Since there are different levels of risks associated with each type of lender, the riskier the lender, the more negative the impact will be.

Fortunately, there are some ways you can boost your credit score.

Take a look at the list of tips we have prepared so you can improve your creditworthiness.     

The first tip is to check your credit score. There is no way you can improve your creditworthiness if you don’t even know what your credit score is.

Therefore, you can access Equifax for free to check your information.

One of the major factors that impact your credit score is defaulting on payments.

So, make financial planning and track your bills.

In case of forgetting something, try to negotiate it.

Be sure you only apply for a new credit line if you really need it.

Each time you apply for a new product, a hard inquiry is run on your reports.

Checking your reports is important because sometimes errors may occur. Therefore, you can access and ask for improvement.

Also, some errors can be a sign of identity theft. So, it is essential to stay tuned!

Now you know how credit scores and reports work, it is time to learn how they impact loan approvals.

As mentioned above, your credit score shows your creditworthiness to the market. So, as you know, credit decisions pass through credit score checks.

Applying for credit lines, loans, and other lending solutions is finding out if you are a reliable consumer in the eyes of the market.

Then, if you want to find out more about how credit scores and loans relate, continue reading our next post and learn everything you need to about credit scores and loans.