Before You Invest What Is Your Credit Score?

Before You Invest What Is Your Credit Score?

Why It Matters, how to Check Yours for FREE and what you can do if there are inaccuracies on your credit report.

Before you apply for any credit it is important to check and understand your credit report so you can take action before the lenders review your credit report. 

Having a clean accurate credit report will save you time and grief during the credit process. 

What is a Credit Score?

A credit score is one tool lenders use to determine your viability to receive and manage credit. 

Your credit score is a rating that quickly gives lenders an indication of the health of your financial history. 

Your credit score can significantly impact your financial freedom. Maintaining a good score can simplify the process of being approved for loans, while a poor score can hinder your ability to access necessary funds. 

What is a Credit Report?

A credit report is paired with your credit score and gives a comprehensive overview of your finances, including credit lines and payment history and can include open and closed accounts including trading accounts, credit cards and personal loans. 

Your credit score condenses this information into a number between 0 and 1000 or 1200 depending on the reporting agency, indicating your risk as a borrower. 

Why Your Credit Score Matters?

If you’ve ever applied for a credit card, personal loan, or home loan, you understand the importance of a good credit history. In general, if you are good at managing money, and paying your bills, loans and credit cards on time you should have a healthy credit score. Whereas if you are always late with paying your bills this can negatively affect your credit score. 

Who is Equifax & Illion?

Equifax and Illion are private reporting agencies. 

If you apply for credit or fall behind on a payment your lender may report this to both Equifax & Illion. 

Credit reporting agencies act as a central hub where lenders report credit activity and anyone with permission can review your credit health and determine your credit risk. 

When you apply for credit, whether that be a car loan, personal loan, credit card or mortgage in almost every case that lender will use Equifax or Illion to review your viability in receiving credit.   

Key Factors Influencing Your Credit Score.

Understanding the factors that contribute to your Credit Score can help you manage and improve it. Here are some key elements that are considered: 

Type of Credit Provider: The type of credit provider enquiring about your Credit Report can affect your score. Different providers carry varying levels of risk. For instance, applying for credit from a bank may be seen differently than applying from a store finance provider, hire-purchase company, or utility company. Research indicates that lenders in certain industries, such as non-traditional lenders, may present different risk levels compared to traditional banks or credit unions. 

Type and Size of Credit Requested: The type of credit and the amount requested in your applications also impact your Equifax Credit Score. Different types of credit, such as mortgages, credit cards, personal loans, and store finance, come with varying risk levels. The size of the loan or credit limit requested can further influence your score. 

Number of Credit Enquiries and Shopping Patterns: Each time you apply for credit and a provider reviews your report, an enquiry is recorded. This includes applications for loans, mortgages, and utilities. Frequently applying for credit from multiple providers in a short period can negatively affect your score, signalling higher risk compared to infrequent applications with a few providers. 

Directorship and Proprietorship Information: If you are a director or proprietor, this information on your Credit Report can influence your score. It’s important to review both the individual and commercial sections of your credit report if you hold such positions. 

Age of Credit Report: The length of time since your Credit Report was created can affect your score. A newer credit file may indicate a different risk level compared to an older, more established report. 

The Pattern of Credit Enquiries Over Time: The distribution of credit enquiries throughout the life of your credit report matters. A newer credit file with many recent enquiries may present a different risk profile than an older file with fewer enquiries. 

Your Personal Details: Personal factors, such as your age and stability (e.g., duration of employment and residency at your current address), are considered in assessing credit risk. These details can influence your Equifax Credit Score. 

Default Information: Defaults on your personal or business Credit Report, such as overdue debts, serious credit infringements, or clearouts, can negatively impact your score. Conversely, a lack of default information can positively influence your score. 

Court Writs and Default Judgements: The presence of court writs or default judgements on your credit report is a sign of increased risk and can lower your score. The absence of such information can indicate a reduced risk level. 

Commercial Address Information: Details such as the location and the duration of occupancy at your current business address are measures of stability and can impact your Equifax Credit Score. 

By understanding and managing these factors, you can take steps to improve your Credit Score and enhance your financial health. 

Understanding Credit Score Ratings.

Your Credit Score rating helps gauge your level of risk compared to the Australian credit-active population. These ratings are based on historical data that assesses the likelihood of an adverse event, such as a default, court judgment, or personal insolvency, appearing on your credit report with