Aussies looking to get a loan, a phone plan or use some buy now, pay later products may be rejected – and it’s all because of something called your credit score.
Just 7 per cent of Aussies actually know what their credit score is, and 61 per cent have no intention of checking their score at all, data from Finder shows.
“It’s concerning to see that so many Aussies in the dark when it comes to their credit score,” Finder personal finance specialist, Taylor Blackburn, told Yahoo Finance.
“Arming yourself with your credit score puts you in a better position when you come to apply for credit or a loan.
“Even if your credit score isn’t great, having that knowledge can help you to avoid making multiple applications which can further damage your score.”
What is my credit score?
Flux Finance founders Justin and Brett Joffe put it this way: “Credit scores are like your Uber rating – but for money.”
Generally, it’s a score between 0 and 1200. Your score gives your bank an indication of how risky you are as a borrower. The higher your score, the better.
“Your credit score acts as your financial identity and is what lenders see when reviewing your financial applications,” Blackburn said.
But getting your credit score isn’t just important for loans – it can also act as a security check.
“Getting your credit score also allows you to check if someone has used your identity to obtain credit in your name,” Joffe said.
“The earlier you find out about this, the easier it is to resolve.”
What impacts my credit score?
To put it simply, your debts affect your credit score. That means things like your utility and phone bills – but even the act of applying for credit can impact your score.
When should I check my credit score?
“We've seen a heap of Aussies who only check their credit score when they are applying for a loan (or when they have already been rejected for a loan),” Joffe said.
“It's actually really important to know your credit score well before applying for a loan – this will help you get your finances in shape before your application.”
It’s also important to do it frequently.
Of those who have checked their credit scores in Australia, less than half have done so in the last three months - and a quarter say it’s been more than a year since they last checked.
“The first step is to get your head out of the sand – banks know your score, so you should too,” Blackburn said.
Where can I check my credit score?
Traditional credit agencies like Equifax will provide you with your credit score, and a comprehensive credit report that takes around 10 days to arrive.
It’s quite complex, so if you want the simple version, you can check your credit score with Flux Finance, or you can access your credit score for free in about 5 minutes with the Finder app.
Here are other sites where you can check your credit score for free.
How can I make my credit score better?
There’s no quick fix to improving your credit score, but there a few things you can do to increase it over time:
Pay your loans and bills on time;
Don’t apply for multiple loan products in a short period of time;
Lower your credit limit; and
Keep track of your credit record and credit score so you can spot any sudden changes.