Your credit score is calculated using the information on your credit report and there are a number of factors that take into account your risk as a borrower. These include:
- Type of credit provider. There may be different levels of risk when approaching different lenders. A non-traditional lender may have a different level of risk than a bank or credit union.
- The size of credit requested. Both the type and size of the loan or credit limit you’re requesting can affect your score. Mortgages have a different level of risk compared to credit cards.
- The number of credit enquiries. Every time you apply for a credit product, the credit provider obtains a copy of your file and the application is noted. If you've shopped around for credit and applied at a number of places in one space of time, it flags you as a higher risk. The pattern of credit enquiries over time also affects the level of risk.
- Age of credit file. The date your credit file was created. A new file may indicate a different level of risk compared to an older file.
- Personal details., such as your age, length of employment and how long you’ve lived at your current address.
- Default information. Any personal or business credit such as overdue debts, serious credit infringements or clearouts could negatively affect your credit score.
- Court writs. Default judgements or court writs may convey you as an increased risk and negatively impact your credit score.
Your Credit Score
You should note that different lenders and credit providers will have different criteria and policies that determine who they lend credit to. Consequently, while your credit score can help you to make a decision around whether to apply for credit, it is not a definitive guide as to whether you will be successful.
Likewise, the different criteria and policies used means that while one credit provider may reject an application, another may accept it. A good Finance broker will be able to assess which lenders to approach for your loan application.
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