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When you apply for a loan, such as a bank loan or credit card, the lender has to make a decision about whether you will be able to pay back the amount you want to borrow.

To do this, they will look at your credit report, which contains a credit score and credit rating. These things show how well you have done in managing and repaying your past loan.

It’s important to understand what information is on your credit report and what your credit score and credit rating are before you apply for a loan.

How to Check Your Credit Score

There are three main credit reporting organizations in Australia: Equifax, Experian and illion. You can request access to your credit report by visiting their websites.

They are required by law to access your credit report for free every three months. Additionally, you can request a free copy of your credit report if you’ve been denied for credit within the previous three months. You can also request a copy of your credit report at any other time; however, you may be charged a fee for doing so.

Each organization may have different information about you, so you may want to request your credit report from each to get a complete picture of your credit worthiness.

What’s on your credit report?

In addition to identifying information such as your name, date of birth, address and employer, your credit report contains information about past or current loans or debts and your repayment history related to them.

If you have ever defaulted on your repayment obligations, defaulted on loans or been declared bankrupt, this will also be included on your credit report, and if you run your own business, business loans or debts may also be included on your credit report. .

Your credit report also contains a credit score, which is essentially a summary of the information on your credit report. This shows your creditworthiness, or how much you owe and how likely you are to repay any loan you’re given, compared to other borrowers.

What do the numbers mean?

Your credit score will range from 0-1000 or 0-1200 depending on which credit reporting agency calculated it.

Credit scores are divided into different groups known as credit ratings, which range from low or average to low to excellent. When it comes to your credit score, the higher the number, the better.

The credit ratings provided by each Australian credit reporting organization are shown below.

Expert:

Excellent: 800-1000
Very good 700-799
OK: 625-699
Fair: 550-624
Below Average: 0-549

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Excellent: 800-1000
Large: 700-799
OK: 500-699
Improvement Room: 300-499
Low: 1-299

Equifax:

Excellent: 853-1200
Very Good: 735-852
OK: 661-734
Average: 460-660
Below Average: 0-459

Who looks at your credit score?

Whenever you apply for a loan or credit, such as a mortgage, car or personal loan or credit card, the lender will request a copy of your credit report from one of the credit rating agencies.

A potential employer may also look at your credit report as part of their background check process.

How to improve your credit score

First, you should request a copy of your credit report from time to time to make sure it is accurate. If you find any errors, notify the credit reporting agency or the appropriate lender to correct them.

If your credit report is error-free, but your credit score is lower than you’d like, there are some things you can do to improve it. They include:

  • Building a savings record with your bank.
  • Ensuring you make regular, timely repayments on any existing loans or credit cards you may have.
  • Lowering the credit limits on your existing credit cards.
  • Limiting the number of debts you have and the number of times you can apply for a loan.

Will a credit check lower your score?

Formal requests from a lender to check your credit report can lower your credit score by 5-10 points each time, because they can indicate that you are in financial trouble and have too much debt, or that you have been turned down for credit by other lenders.

Asking to check your own credit report should not affect your credit score.

Is a credit score check free?

It’s free to access your credit report every three months if you’ve been turned down for credit in the previous three months, or if you’ve asked for errors on your credit report to be corrected and want to make sure it’s been done.

At other times, you may be charged a small fee to access your credit report.

What credit score do banks use in Australia?

As it is the largest of the credit reporting organizations, most banks in Australia use Equifax credit scores to assess credit worthiness. However, they may also use information from other credit reporting organizations as well as their own internal risk assessment tools.

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