Credit reports and credit scores

Your credit score (or credit rating) is used by lenders to decide whether to give you credit or lend you money.

Your credit score is based on personal and financial information about you that’s kept in your credit report.

We can get you a copy of your credit report

We can access your credit score and credit report for free.   Or you can access it yourself by contacting:

  • Equifax 138 332 (we access the same reports lenders view through Equifax)
  • Experian 1300 783 684
  • illion 132 333

How your credit score is calculated

Your credit score is calculated based on what’s in your credit report. The main sections in your credit report are:

  1.  the number of credit applications you’ve made,
  2.  if you have unpaid bills resulting in court judgements, defaults and/or bankruptcies,
  3.  the amount of money you’ve borrowed and need to repay, and
  4.  whether you pay on time.

Your score will be between zero and 1,200 (with Equifax).

A higher score means the lender will consider you less risky. This could mean getting a better deal and saving money.

A lower score will affect your ability to get a loan or credit.  Below is an excerpt from the Equifax Veda Check service that we use as mortgage brokers.

Generally, scores are categorised as follows with Equifax:

Range

Rating

0 to 459

below average

460 to 660

average

661 to 734

good

735 to 852

very good

853 to 1200

excellent

 

Some lenders will have a minimum requirement with your credit score before even considering you as a client.  Other lenders won’t even look at the score!  So, it’s possible to still obtain credit if you have issues with your credit report that impacts your credit score.

 

1. The number of credit applications you’ve made

Lenders pay attention to the number of credit enquiries you make.  Some will even score you lower on their own internal credit scoring systems if you make too many enquiries.  So, it is a good idea to NOT shop around for finance too much.  It also is important to make sure that when discussing a possible new loan that the lender does a ‘soft’ credit check that doesn’t leave an enquiry on your file.  We could do this for you if you wanted to review your file and we do this for our clients when they are thinking about applying for finance using our services.

Notice in the below excerpt the client has only made 2 enquiries in the last 5 years.  The amount enquired for was only $1 so it is likely they went into a branch to see how much they could borrow, and the lender did a ‘hard’ credit check rather than a ‘soft’ one, which wouldn’t have left an enquiry.  We often see clients that have been to two or three banks with two or three $1 credit enquiries.  Each one reducing their score just a little bit more!

 

Conversely, the client below has made numerous enquiries (both consumer and commercial), which will lower his credit score.  Lenders view multiple enquiries as a warning sign.  Some lenders that use their own credit scoring may even decline you if your credit files shows too many credit enquiries.

2. If you have unpaid bills resulting in court judgements, defaults and/or bankruptcies

 

The example below demonstrates a credit report that includes 1 default, which was an unpaid telco bill.  There was also a personal insolvency, which was in fact a Part 9 debt agreement (an act of bankruptcy).  Defaults can be listed if you are more than 60 days in arrears with a payment and it is over $150.  They can greatly impact your credit score.  Many lenders won’t want to see any defaults.  If they are a little flexible, you may find that they may accept up to $500 (maybe $1,000) but they generally must be paid out.  Some lenders will only allow non-financial defaults.  That is, they may be open to a telco default but not a financial default like not paying a credit card.  If the default is paid out your credit file will also reflect that. 

Personal insolvencies (such as Part 9 Debt Agreements or Bankruptcy) and court actions can result in you receiving no credit score at all – you are effectively excluded.  This will mean mainstream lenders will not look at you at all. 

There are lenders that will ignore defaults that are quite old or paid out.  There are also other lenders that are quite generous in their treatment of debt agreements, court orders and bankruptcy and may still be willing to lend to you.

3. The amount of money you have borrowed and must repay

Another contributing factor to your credit score is how much debt you have outstanding.  The type of debt you hold is also important in determining your credit score.

In the above excerpt the number of accounts and total debt are displayed.  Notice that the types of accounts are broken down into different account types.  High levels of debt with some account types can reduce your credit score.  For example, having multiple personal loans, credit cards and Buy Now Pay Later (BNPL) accounts with high outstanding balances would indicate a higher level of risk than having one high mortgage.   This is because you may be funding your lifestyle with shorter term debt, and this is considered risky.

 

4. Whether you pay on time

Lenders are also interested in your ability to meet your commitments responsibly.  Your credit report will list every open debt facility you have and be broken into the different account types.  The outstanding debt and your repayment history (RHI) will also be included.  An example is found below.

RHI shows whether you have been making repayments on time for the past two years.  The worst RHI for this client was a ‘2’.  The codes are a quick way for lenders to scan your repayment history and are explained below.  For this client, the ‘2’ meant that the Latitude card was between 30-50 days overdue at worst over the last 2 years.  Higher numbers can indicate a high degree of financial stress and reduce your credit score.

Code

Meaning

Explanation

0

Account paid on time

 

1

0-29 days overdue

 

2

30-50 days overdue

 

3

60-89 days overdue

 

4

90-119 days overdue

 

5

120-149 days overdue

 

6

150-179 days overdue

 

X

180+ days overdue

 

C

‘Account is closed’

 

A

‘Not associated’

 

R

‘Not reported’

the bank or credit provider didn’t provide payment history for this period, which is a fault with the credit provider, not necessarily you as an account holder.

P

‘Pending’

purchases made with a credit or debit card that are pending (for up to 5 days) but have been deducted from your available funds until the merchant finalises the payment.

O

‘Other’

 

T

‘Transferred’

a balance transfer of your debt with one lender to another usually to save on interest repayments on a credit card or store card.

Aside from the letter codes, many mainstream lenders will rule you out with anything greater than a ‘0’ on your RHI within your credit file.   However, there are some lenders that will only be concerned with the last 6 months of the 24 months displayed on your credit file.  Some may even allow a ‘1’ or ‘2’ with a good explanation.  If your RHI is a bit messy, then there are lenders that will NOT use this part of your credit file to decide whether to lend to you (they may only use the ‘Credit enquiries and defaults’ and ‘Personal insolvencies and court actions’ sections).

Conclusion

Your credit score contained within your credit report is extremely important.  It can be the difference between getting approved for finance at a good rate vs being declined or offered poor terms.  It is a good idea to grab a copy of your report prior to applying for finance so you understand how different lenders may view you in terms of risk.  Even if your report isn’t great there are lenders that are flexible in their approach to the information contained within your credit file, may ignore certain parts or ignore the score completely.

Contact us below if you would like a copy of the credit report most lenders will rely on.  We will provide some commentary to assist you as well.

Get a Free copy of your Credit Report emailed to you