Your Credit Score – What you need to know

Over the last year or so in Australia there have been changes to credit reporting  known as Comprehensive Credit Reporting, and these changes could have impacts to your Credit Score.

Historically your credit report only detailed any credit enquiries you have made and if you have ever had a default registered against your name.

Under the new comprehensive credit reporting process there is much more information that can be collected and reported.

Your credit report can now include not only what you have applied for, but what credit and loan facilities you currently have, along with your repayment history and credit conduct going back two years.  So even if you have a credit card limit that you never use, it is still likely to show as a facility you hold to show prospective lenders.  Similarly, if you missed a loan payment a year ago, it may show up on your credit report.

So how does this impact borrowers?

Well, for those with a good credit history it may become good news over time as there is some thought that borrowers with a good history may eventually get access to lower interest rates and borrowing costs.

However, for those borrowers that have been late with any loan or credit card repayments over the last two years, or hold surplus credit card limits – it could adversely impact your credit score and make access to credit harder.  It could even mean that you may be restricted to higher rate loan options. 

So what can you do:

    • Make sure you pay all bills and loan repayments on time.
    • Focus on paying off your credit card in full if possible each month, rather than just making minimum repayments.
    • Lower any Credit Card Limits you don’t need
    • Limit credit enquiries – frequent applications can look bad on your credit report
    • Be very cautious about identity theft
    • Spend the time to get a copy of your credit report and review it periodically so you know what your credit score is over time.

 

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