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Is your credit score... delicious or disgusting?

OK its a bad pun but we're using a hamburger as a reference so we will allow it.


Equifax, one of the credit reporting bureaus, has offered a tongue in cheek (can we get away with that cliche??) matrix showing what components make up your credit score, and more so - the importance of each component.


80% of your credit score is dependant on two factors - the number of credit enquiries and your recent on time repayment history.


Look at the heavy weighting given to both the credit enquiries and your recent repayment history - this is more than 80% of the way your credit score is determined, and this is not something that is quickly fixed - credit enquiries will stay on your file for up to 5 years & your repayment history is visible for up to 2 years

- and time is the only real solution for both of them.


The key here is -

  • minimise your credit enquiries and

  • make your repayments on time.


Next most impactful is adverse repayment history


Adverse events; defaults & judgements are the meat in our burger and have the next greatest impact on your credit score. Remaining on your file for up to 2 years, we find many credit providers will offer to "remove" your default if you pay it out, however rarely do they - rather they will update the listing to paid which is only slightly better than unpaid.


Lenders particularly dislike:

  • unpaid defaults

  • to other lenders

  • and where they can tell that you know about it (because there have been enquiries made after it is listed) and have made no attempt to rectify


So the remedy

  • pay your credit on time, or communicate with the providers early - speak with their hardship team

  • and rectify defaults as soon as possible


There are circumstances where the default is listed in error or the proper process has not been followed and in these instances there is a process to follow to have your report updated, this is well worth the effort.


The balance of your credit score is made up of stable employment and residence history, your overall credit limits and the length of time your credit report has been open. These are the minor things but easy to improve. Note that changing credit limits - even closing a credit card - has an impact on your score so clean up your credit earlier rather than right before you intend to apply for a loan.


What is a good credit score?


Credit scoring varies between the 3 credit reporting bureaus in Australia with each having their own scale:

  • Equifax: Good – 661 to 734; very good – 735 to 852; excellent – 853-1,200.

  • Experian: Good – 625-699; very good – 700-799; excellent 800-1,000

  • Illion: Good – 500-699; great – 700-799; excellent – 800-1,000.

Source: Equifax, Experian, Illion.


However, whether or not it’s a ‘good’ credit score depends on what you need to use it for, what credit product you hope to take on, and via which financial institution you are applying for credit.


Can you have a technically good credit score and still be declined for a loan?


Yes. There are many factors involved in loan assessment and leaving aside criteria like affordability and deposit - banks have their own internal "credit score" system of which your bureau score is only one element.


Generally banks attribute points for more information (vs less) which is why we will ask for a full and comprehensive picture which includes super balances and cars etc - no banks won't take security over these items but it builds a picture in points of your capacity to manage money. They also put weight on your account conduct, being near limits on cards or having overdraws on your bank accounts is very negative - and if you have history with that lender which isn't pretty then expect that to have a very large influence on your chances of approval.


The governments money smart website has loads more resources on managing your credit here.


What makes up the current comprehensive credit score?

credit score matrix broken up into segments representing a hamburger overall
Is your credit score... delicious or disgusting?

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