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When it comes to borrowing money, lenders need to know that you have a good track record of paying back what you owe. This information is made available in the form of a credit score (or credit rating), which effectively sums up your entire credit history.
Despite their importance, there are plenty of Australians who have no idea what their credit rating is or how the system works. If you fall into this category, it may be worthwhile spending some time finding out your score. Not knowing can be a problem for a number of reasons, and may even prevent you from being able to access competitive loans or borrow money at all.
To avoid this, we've put together some essential information that Australians need to know about their credit, as well as how to improve their scores.
What is a credit score?
Your credit score is a single number that reflects your history of credit and debt at any particular point in time. It's used by lenders to assess your payment reliability, as well as how much debt you've accrued and your behaviour in terms of paying it back. The rating systems used in Australia can differ depending on the agency calculating your credit score, but will always be a number between zero and either 1,000 or 1,200. The higher your score, the better you'll appear to potential lenders.
Credit reporting includes all sorts of information, ranging from your usual repayment amounts and how often you make them all the way through to other factors such as how old you are and where you live. As these factors can vary frequently, you may find that your credit score changes as often as every month, making it important to check in regularly via one of the websites below:
Why is a credit score important?
While there are no concrete rules as to what credit scores will and won't secure you a loan, it's essential to keep in mind that your rating will be assessed by any lender before they consider accepting your application. For example, if you have a very low score due to multiple unpaid debts, that signifies unreliability, which may be enough to convince a lender that you're too much of a risk.
At the same time, the higher your credit score, the more likely it is that your application will be approved without any fuss.
How to improve your credit score.
If you're concerned about your credit score and would like to improve it, there are several ways to do so. First and foremost, you should make sure to pay off any debts that you have as quickly as possible, without overstretching your financial limits. It's just as important to make these payments on time, so if you're worried about having multiple bills to pay each month, it may be a good idea to consolidate them all into one simple payment.
Another great way to improve your score is by making sure to fully pay off your credit card each month. Not only will this make you look better to lenders, but it will also help you avoid additional debt by eliminating the potential accrual of interest.
For more information on credit scores or securing the best loan for your needs, contact Beyond Bank today.
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This information has been provided without taking into account any of your objectives, financial situation or needs. You should consider whether it is suitable for your circumstances before acquiring this product.
All loans are provided by Beyond Bank Australia Ltd ABN 15 087 651 143 AFSL/Australian Credit Licence 237856. © 2023.
