Your credit score reflects your personal and financial information. It predicts your financial behaviour, like how likely you are to repay your loan on time.

Lenders use credit scores to decide whether giving you credit is viable. Knowing the ins and outs of your credit report, including your repayment history, is essential. It allows you to not only negotiate a better loan deal but helps you to understand why a lender is rejecting you and make improvements to your credit report over time.

If you’ve ever applied for a loan or credit card, you’ll have an active credit report.

How do I check my credit score?

Why is your credit rating important?

Without a good credit score, credit providers will unlikely let you borrow or access credit cards or loans. Having a good repayment history is, therefore, essential.

Your credit file can affect your ability to take out loans for years to come. You could be refused credit without a decent credit score, including a mortgage, car loan, or credit card. This can stunt your future financial goals.

How credit scores are calculated

How is a credit score calculated? Five factors affect credit scores, and lenders will check this before letting you apply for a home loan.

These include:

• Payment history. This accounts for 35% of your credit score and shows whether you make payments and whether you often miss any. Payments late by over 30 days will be reported by your lender and lower your credit scores.
• Outstanding loan balance. Making up 30%t of your credit score, this is based on how many accounts and the type, as well as the overall amount you owe. Having lots of high balances and maxed-out credit cards will negatively affect your credit report.
• Credit history length. Your credit report length makes up 15% of your overall score. The longer your history of making payments and taking out credit, the higher your score.
• Types of accounts. This makes up 10% of your credit rating. Having various accounts, such as home loans and credit cards, will improve your credit score over time.
• Recent credit history. The final 10% of your credit report is recent credit history. For instance, if you’ve opened lots of new accounts in the last few months it could indicate financial hardship and lower your score.

Take note, different credit reporting agencies may have slightly different weighting or criteria.

Is a credit score check free?

Yes, you can access a free credit score online or by mail, and you can access your credit report every three months. To stay current with your financial situation, we recommend accessing your credit report every year to assess your progress.

Why should I check my credit score report?

Regularly checking your credit report will allow you to understand better your financial situation and how to expand your credit limits over time.

If your credit score is low, it might be time to practice credit repair. You can do this by studying your credit reports and implementing various strategies, including:

• Paying bills on time
• Paying off credit cards and existing loans
• Making small, regular payments

How can I fix errors in my credit score report?

If you find an error on your most recent credit report, dispute the information with the reporting company, such as Equifax or Experian. Explain in writing what is inaccurate and include evidence through documentation to support your dispute. If this has happened to you, try not to panic. Your credit score will be rectified when the dispute is settled.

You can also work with a credit repair company. Some potential benefits of working with a credit repair company include:

1. Expert advice and guidance: Trusted credit repair companies have a deep understanding of credit reporting laws, regulations, and procedures, and can offer expert advice and guidance on how to improve your credit score and manage your finances more effectively.
2. Credit report analysis: Credit repair companies can analyse your credit report and identify any errors or inaccuracies that may negatively affect your credit score. They can then work with credit reporting agencies to correct or remove these errors.
3. Debt management strategies: Credit repair companies can offer debt management strategies and tools to help you pay off your debts and improve your overall financial health.
4. Credit score monitoring: Many credit repair companies offer credit score monitoring services, which allow you to keep track of your credit score and receive alerts if there are any significant changes.
5. Access to credit-building products: Some credit repair companies offer credit-building products, such as secured credit cards or credit builder loans, which can help you improve your credit score over time.

If you’re thinking of working with a credit repair company, do your research first to choose a reputable and trustworthy one.

Can I get a home loan with a low credit score?

Getting a home loan with a low credit score is possible, but it can be more challenging and may come with higher interest rates and fees. Lenders use credit scores to assess the risk of lending money to an individual, so a low credit score may indicate to them that you are a higher-risk borrower.

Looking for a home loan? Consult with Lendstreet

At Lendstreet, we aim to help Aussies find the right home loan that best suits their needs.

We can also explain how your credit score will determine your search for a home loan.

Consult with one of our professionals today to find the right home loan for you – whether you’re purchasing your first property or refinancing your mortgage.

FAQs

What is a good credit score in Australia?

Equifax and Experian generally consider a credit score above 660 to be good. However, Illion has a different standard and considers a credit score of 500 as good. Read more here.

Will missing loan repayments affect my credit health?

Yes, regularly missing loan repayments will negatively impact on your credit health. Your payment history accounts for 35% of your overall score, so avoiding missing payments is essential.

How do I improve my credit score?

To improve your credit score, you can take the following steps:

1. Review your credit report for accuracy and completeness.
2. Dispute any errors you find on your credit report.
3. Make timely payments on your bills and loans.
4. Avoid excessive credit applications and unnecessary expenses.