If you’re thinking about applying for a loan or credit card it can be a good idea to find out your credit score before starting an application. “Your credit score and credit history will play a big role in whether or not your finance is approved,” says Mortgage Choice CEO John Flavell.
While the method your chosen lender employs to work out your credit score may differ from the methodology used by credit score websites, these websites will give you a good idea of what your credit score is and whether or not it will be possible for you to obtain finance, says Flavell.
There are two websites that let you get your credit score free of charge. One is getcreditscore.com.au, which is backed by peer-to-peer lender SocietyOne and uses Veda data, and the other is creditsavvy.com.au, which uses information from Experian. As the sites use different data, it can be worth getting your score from both of them. And you don’t have to worry – using these services will not affect your credit file.
To get your score you need to provide your full name, date of birth, email, current address (and your previous address if you’ve been at the current one less than three years) and driver’s licence number. Your score will appear on the screen.
The two sites have different scoring ranges. GetCreditScore, for example, ranges from 0-1200 while CreditSavvy is 0-1000. In both cases, though, the higher the score the better. Your score can change over time.
If you get your score and the results aren’t great, don’t despair because there are things you can do to improve it. Start by paying down your credit card balance. “Carrying a high percentage of debt in relation to available credit drags down your credit rating, so it is important to focus on paying down these balances,” says Flavell.
The second thing you need to do is improve your payment habits. “Your payment history accounts for 35% of your credit rating, so it is essential to keep your payment history positive,” says Flavell.
Believe it or not, it can be better not to close any accounts that you no longer use. “A portion of your rating depends on the length of your credit history. A long credit history is considered to be beneficial, so you want to keep old accounts open to make your overall credit history as lengthy as possible,” explains Flavell.
It is also worth maintaining a good mix of credit, he says. “Lenders want to see a mix of credit types to ensure that you can handle different types of credit. Mortgages, car loans, credit cards and personal loans are all different types of credit.”
Finally, only apply for credit when it is absolutely necessary. “Applying for a credit card or loan is an activity that is reflected on your credit report,” says Flavell.
“Too many applications in a short period of time can have a negative impact on your credit history.”