Your credit score is an important (or one of the main) considerations that can impact a lender’s decision when you apply for credit.
So before you start a credit card, mortgage or any loan application, it is always a good idea to do a health check on your score.
Below are some stats and tips on what can impact your credit history, and it is important to be aware of your credit score.
Here are some stats
Awareness across Australia continues to improve, but 65% of people have still never checked their credit score (an improvement from 71% in 2017).
- 22% don’t know how to check their credit score (an improvement from 32% in 2017)
- 17% don’t know what a credit score is (an improvement from 24% in 2017)
- 13% haven’t got around to it yet (no change from 2017)
Again, despite improvements, misconceptions remain rife about what financial activities people think improve their credit score:
- 87% incorrectly believe paying their utility bills on time improves their score (slightly worse from 2017 at 86%)
- 22% incorrectly believe having high value assets improves their score (an improvement from 26% in 2017)
- 17% incorrectly believe getting a pay rise improves their score (an improvement from 19% in 2017)
However, when asked what worsens a credit score:
- 76% correctly identified “not paying a bill for so long that a debt recovery agent contacts you” (an improvement from 70% in 2017)
- 67% correctly identified defaulting on a loan (an improvement from 58% in 2017)
- 48% correctly identified making a high number of credit applications in a year (an improvement from 40% in 2017)
So, what can impact your credit score?
Under the negative credit reporting system, your credit score could be affected by:
✔︎ Paying a default Increase score – increase credit score
✔︎ Negative data expires and is removed from your credit report over time – increase credit score
✘ Multiple credit applications in a short space of time – decrease credit score
✘ Default (impacts report for 5 years) – decrease credit score
✘ Court judgements – decrease credit score
✘ Bankruptcy actions – decrease credit score
✘ Not paying a bill that goes to a debt recovery agency- decrease credit score
✘ Short term credit (eg. Pay day lenders) – decrease credit score
With the Comprehensive credit reporting system (CCR), these are the situations or variables that can impact your credit score:
✔︎ ✘ Adding a new credit account – increase or decrease credit score
✔︎ History of making credit repayments on time – increase credit score
✔︎ Bringing accounts back up to date – increase credit score
✘ Having too many open credit accounts – decrease credit score
✘ Having too much unsecured credit (eg credit cards) – decrease credit score
✘ Having too high a combined limit on credit accounts – decrease credit score
Source and inspiration, Experian, Know the score: how positive data could impact your next credit application.