Ever wondered how a simple number could be the gatekeeper to your financial dreams? Welcome to the world of credit scores, the silent arbiter that can make or break your aspirations for a new home, a reliable car, or even a business venture. In Australia, a credit score is more than just a number; it’s a reflection of your financial history and habits.

What is a credit score?

Your credit score is a score between 1 and 1200 that lenders use to gauge how risky it might be to lend you money. Think of it as your financial report card, with grades ranging from ‘excellent’ to ‘average’, down to ‘below average’. It’s essentially a snapshot of credit history that lending organisations will use to assess how creditworthy you are. 

A good credit score can be a lifeline, especially when times are tough. It can affect whether you are approved for credit including a mortgage. If you are hoping to get finance, you should be hoping to achieve the best score possible to maximise your chances of approval. 

How is your credit score calculated?

Your credit score isn’t pulled out of thin air. It’s meticulously calculated based on several factors including your repayment history, and other factors including:

  • Making multiple enquiries to finance organisations
  • Type of credit that you are applying for (payday lenders and short-term finance can have a negative impact)
  • Repayments on your bills and utilities 
  • Personal information including your employment and address changes

Credit reporting organisations including Equifax use this information to determine your credit score.

How to improve your credit score?

The first step is understanding where your credit score is sitting at the moment. Twice per year, you can download your credit report online for free. You can also pay an additional fee to access alerts when your report is being checked.

Once you are aware of your score, there are several ways to continue to improve your credit score. 

  • Stop making multiple enquiries 
  • Pay your bills on time
  • Make your loan repayments on time
  • Avoid short-term payday lenders
  • Negotiate with your lender 

Taking control of your financial future

Your credit score isn’t set in stone. It’s a dynamic part of your financial profile that you have the power to improve. By understanding what affects your score and taking proactive steps to manage it, you’re ahead of the game. 

Written by Supervisor – Operations, Dale Engberg. 

Dale is our Operations Supervisor, with 7 years of experience in lending and savings. Previously, Dale worked at a Payroll Company in their clearing house division where he specialised in large account holding and data file writing. Now in his role at APS, Dale is looking after Personal Lending, Mortgages, Credit Control and Investment Savings Accounts. Dale enjoys spending time with his family, is a gaming enthusiast and works on PC Hardware. He is also an avid follower of AFL/AFLW Team Melbourne Demons.