Everyone has a number. An oft-overlooked number, that will play a part in nearly every financial decision you make. It can stop you from setting up power at your new flat, or it can help lock in that credit card you've been eyeing up.
This number is your credit score, and it's time to get familiar with it!
What is your credit score?
Your credit score is a number between 0 and 1,200 that indicates how reliable you are with credit. A score in the mid-600s is good, 700-800 is very good, and above 800 is 'excellent', according to Finder.
There are four main credit reporting agencies in Australia, which record your credit history (applications, approvals, repayments, defaults) and calculate your credit score based on this activity. To find out more about credit reporting, visit CreditSmart.
The higher your score, the more credit-worthy you are (and the more likely lenders are to approve your credit application). There are many everyday items that can impact your credit score, including:
● Your age, living situation and current employment.
● Types of credit you have accessed or applied for (loans, mobile plans, flat utilities).
● How much credit you have access to.
● The overall number of credit applications you have made.
● Your history of repayments (including overdue loans or defaults).
● Bad debt or personal insolvency actions (particularly around bankruptcy).
So it's a comprehensive summary of your history around credit in any shape or form. For many people, that won't seem like a big deal - after all, you've hardly interacted with lenders and are unlikely to have a bad score, right?
Not necessarily. It's important to always be aware of your credit score, and how it has changed.
Why is a credit score so important?
Lenders or credit agencies will always analyse your credit score before approving your credit application. This goes beyond home loans - as mentioned above, it impacts mobile plans, utilities like power or water, bank overdrafts and credits cards.
On top of this, information stays on your credit report for as long as five years. That means missed payments from up to five years ago could prevent you from credit approval now, even if your current situation is financially safe and sound.
Do you know your credit score? If not, it's definitely worth finding out. If you're happy with yours and are thinking about your next financial steps, make sure to visit your local BOQ branch.