Money and Life
(Financial Planning Association of Australia)
With the introduction of mandatory Comprehensive Credit Reporting for the big four banks from 1 July 2018, it’s more important than ever to know what’s going on with your credit score. Find out just what a credit score is all about and what to do if you run into problems with yours.
What is a credit score?
Also known as your credit rating, your credit score is based on a report lenders request when you apply for a loan or credit card in your name only, or together with someone else. From store cards to home loans, your credit score is used by lenders to decide whether you can borrow money, how much and on what terms.
How do I check my credit score?
Your credit score or rating is a single number based on information held by a credit agency. There are currently three credit agencies in Australia, Equifax, Experian and Dun & Bradstreet and you may have different information on file with each of these. So if you want to be certain of your current rating, you need to check with all three agencies to be completely in the picture. Each agency will provide you with a free current credit report once a year, usually within 10 business days.
You can use the following online services to request your credit report:
- Creditsavvy (Experian score)
- Credit Simple (Dun and Bradstreet score)
- Finder (Experian score)
- Getcreditscore (Equifax score)
If you’re concerned that checking the information these agencies have on record about your credit history will actually affect your score, don’t be. It’s actually a good idea to check on your credit rating from time to time. It can help you to become aware of how your score could affect future loan or credit applications. It’s also a good way to protect yourself against identity theft or fraud. If someone has used your personal details to apply for credit you may not know about it without checking your credit report.
What sort of information is my credit score based on?
In the past your credit score was based on negative information only. With new legislation effective from 1 July 2018, comprehensive credit reporting (also called positive credit reporting) has become mandatory for the big four banks. This means NAB, ANZ, Westpac and Commbank will be required to provide extra information for your credit report. According to ASIC’s MoneySmart website, these extra details include:
- What sort of credit products you have held in the last 2 years and who they are held with
- Your usual repayment amount
- How often you make repayments and if you make them by the due date
The aim of this new requirement is to enable lenders to make more informed decisions about providing loans and credit. However, it may also mean your credit score goes up or down as a result, so now is a good time to check your current rating.
Your credit report and rating will continue to be based on the following details of your financial history:
- Credit or bill payment defaults – where a payment greater than $150 is more than 60 days overdue and a debt recovery process has begun. These will stay on your credit report for 5 years, even after they have been paid in full.
- Clearouts – cases where a credit provider has been unable to contact you to request payment. These will stay on your credit report for 7 years.
- Other overdue payments that you’ve since settled.
- Credit cards in your name and your credit limit on each card
- Credit applications you’ve made for store/credit cards