Your credit report contains a summary of your financial history, your credit score also reflects how reputable you are or have been with your creditors and is maintained by credit reporting agencies.
The report also records how often you have applied for a loan and whether you have been successful – or not – in getting credit.
Equifax (formerly Veda) is the country's largest credit reporting bureau and scores you with its proprietary Equifax Score, a number between 0 and 1200, the higher the number the less of a risk you are.
Credit Scores are one of the main key indicators that a credit company will use when determining if they should lend money to you.
Understanding a credit score
The guide below is broken down in bands with an explanation of how each band is determined by Equifax, as well as stats to show the percentage of the population is within that score range.
- Below average to average (0-509). It's more likely an adverse event will be recorded on your file in the next 12 months. You are in the bottom 20% of Equifax's credit-active population.
- Average (510-621). This score suggests that it's likely that you will incur an adverse event in the next 12 months. Your score places you in the bottom 21-40% of the credit-active population.
- Good (622-725). Adverse events are less likely to be recorded for the next 12 months. You fall in the mid-range (41-60%) of Equifax's credit-active population.
- Very good (726-832). Unfavourable events are unlikely to be recorded in your credit file within the next 12 months. Your score places you in the second-highest percentile range of the credit-active population (61-80%).
- Excellent (833-1200). Adverse events are highly unlikely to happen within the next 12 months when compared to the average Australian. The odds of no adverse events occurring on your credit file in the next 12 months are five times better than the population average and you are in the top percentile range (81-100%).
How to improve your credit score
Your credit score is recorded over a 2-year period, so for example payment defaults, court judgments and defaults that are recorded during this period can affect your score. Bankruptcies can take up to 5 years to stop affecting your credit score.
Before you get disheartened, there are ways to manage your credit score and start to push it upwards.
We have highlighted some of the behaviours you could action to start to impact your credit score:
- Always pay your bills (including rent or mortgage) on time. Setting up direct debits can help.
- Make loan repayments on time. If you are worried you can’t make a payment, let your lender know.
- Pay off outstanding debts.
- Pay off your credit card balance each month and consider lowering your limit — which reflects better in your debt-to-credit ratio.
- Don’t make too many enquiries for credit and limit your applications to when you are in a better credit position.
- Check your credit score and be alerted if it changes — we recommend this website Get Credit Score
- Check your credit score and be alerted if it changes — we recommend this.
- Maintain credit payments over the long-term.
- Slow down your purchases to give your savings a boost.
Some points to note here are; bills of $150 or more that remain outstanding for 60 days or more can be reported as a miss payment or a default – the later payments you have the more this will impact your credit score.
Another payment that can impact on your credit score is loan payments, make them on time or at least within 14 days of the due date to maintain a good credit history.
Also, it helps to not make too many loan applications; too many loan applications over a short period of time can greatly affect your profile and in turn affect your credit score.
Applying for a car loan with 1800Approved does not affect your credit score. At 1800Approved we have access to 40+ lenders to find you a financial solution that is tailored to you.