How Important is My Credit Score and How Does it Work?
Every Australian citizen has a credit score, which is a way for lenders to quantify a person’s creditworthiness when they apply for credit. It is quite a complex process to calculate a credit score, which uses many variables to give a figure that is between zero and one thousand. As lenders refer to a person’s credit score upon receiving a loan application, it is very important, and there are several online agencies where you can discover your credit score for free, should be curious.
Information Used to Calculate Credit Score
The following information is used when creating a person’s credit score:
- Personal Details – Age & where you live.
- Type of credit providers the person has used.
- Amount of credit currently owed.
- Number of credit applications the person has made.
- Unpaid or overdue credit.
- Any debts agreements or bankruptcy charges.
Five Point Scale
There is a total of 5 ratings, which are as follows:
- Excellent – The person is highly unlikely to suffer any event that would harm their credit score in the next 12 months.
- Very Good – The person is unlikely to suffer any event that would harm their credit score in the next 12 months.
- Good – The person is less likely to suffer any event that would harm their credit score in the next 12 months.
- Average – The person is likely to suffer an event that would harm their credit score in the next 12 months.
- Below Average – The person is more likely to suffer an event that would harm their credit score in the next 12 months.
Ways to Improve your Credit Score
If you would like to improve your credit score, here are a few ways to do that:
- Lower your credit card limits.
- Consolidate multiple loans.
- Limit your credit applications.
- Making repayments on the due dates.
- Paying your mortgage on time.
- Paying off credit cards at the end of the month.
Prior to applying for a mortage, you should review all of the above and see if there is any way to lower your credit score, which would improve your chances of being approved.
Obtaining a Loan with a Poor Credit Score
Just because a person has a less than perfect credit score, they can still obtain a loan with an online finance company such as Universal Finance, which is an established Australian finance provider who can process loans for people with bad credit history. They are a difficult loan specialist who has affiliations with many lenders, and even if you have been refused by other lenders, there is nothing to lose by applying with a specialist loan provider.
It is very easy to make contact with an online lender, simply search using Google or another search engine, and that would bring up a list of loan providers. Prior to doing that, you can first discover what your current credit score is, and that will give you some idea of your creditworthiness, and should it be on the low side, see what you can do to improve your score.