What to know about credit scores and credit history in Australia

Your credit history and rating are a crucial part of how financial institutions measure credit risk and decide whether to grant you a loan (such as a home loan, personal loan or credit card).

But there’s a lot of confusion and many myths surrounding what’s actually in your credit history and how your credit score rating is calculated in Australia. So, we’re here to tell you some of the key things to know about credit history and ratings which could help build your financial knowledge and help you achieve your goals around creditworthiness.

Your credit history, credit file and credit rating score are all interlinked terms and are used by financial institutions and some other kinds of businesses to get a sense of how trustworthy you are when it comes to handling money. Examples of the kinds of organisations that might access your credit information include:

• Banks, lenders, credit unions and other financial institutions
• Phone and utilities providers (utilities include water, gas and electricity providers)
• Vehicle rental companies and other companies that lease out products (such as landscaping equipment)
• Retailers that allow people to buy their products and services on credit

Importantly, a credit provider or organisation must seek your permission before accessing your credit report.

Your credit report is a document that summarises your credit history, which lenders may use to determine your creditworthiness. It comprises comprehensive credit reporting information from credit providers and a few other sources such as bankruptcy and judiciary records.

A standard credit report includes consumer credit information (such as details of your personal mortgage, how you’ve handled past consumer credit, and will note when your ‘consumer’ credit report was accessed during an application for commercial credit (such as business loans or business credit cards).

Other than that, it generally won’t include information about any commercial credit you may have been granted. That information is included in a separate credit report.

Your credit report may include some of the following information whenever it’s relevant to you:

Personal information
- Full name
- Date of birth
- Gender
- Current address and two most recent previous addresses
- Employer details (current or most recent)

Public information from courts and government bodies such as:
- Court rulings about unpaid debt
- Bankruptcy details
- Whether you’ve been offered a debt agreement
- If you are, or have been, a company director

Credit history information such as:

• Loan enquiries and credit applications from the past five years
• Any compulsory repayments that you missed(see ‘defaults’ for more information)
• Any compulsory repayments that you paid at least 14 days late (so if you forget to make a payment but then pay it a couple of days after the due date, it’ll be listed on your credit report as having been paid on time)
• Any phone or utilities bills you paid at least 60 days late
• Current and recent debts — the following information is included:
  • The name of the organisation that provided the credit
  • The date the account was opened
  • The date the account was closed (debts remain on your credit report for two years closing accounts)
    -The type of account it is
    -The current credit limit of the account
    -Your repayment history from the preceding 24 months

Your credit history is the information in your credit report that covers how you’ve repaid (or not repaid) your debts over the previous 24 months.

Financial hardship information such as:

• Any financial hardship arrangements you entered into
• Whether they were temporary or permanent
• A history of how you repaid your debt under the arrangement (whether you met the terms of the arrangement)

Your credit rating

Defaults information

• If you take more than 60 days to make a debt repayment where the amount due is at least $150, the missed repayment may be listed as a default (your credit provider will have given you two written warnings before adding the default to your credit report)
• Defaults remain on your credit report for five years
• If you later pay the amount you defaulted on, the repayment will be listed on your report, however, the default will remain on your credit report for the full five years

Serious credit infringements

• If you commit financial fraud, by lying about your financial situation when applying for a loan for example, this could be considered serious credit infringement and could be listed on your credit report for seven years
• If you don’t fulfil your credit obligations intentionally, by moving house and not giving your credit provider your new address despite them asking for it for at least six months, for example, and then default on a payment, your credit provider will add the infringement to your credit report — however if you later pay the debt, the serious credit infringement will be removed from your report (but the default will remain for the full five years)
• A list of everyone who has accessed your credit report

Your credit score rating is a number that expresses how trustworthy you are when it comes to credit, or your creditworthiness. Your credit score is calculated based on the information on your credit report. Equifax (formerly Veda) is one of Australia’s largest credit reporting agencies, and gives credit ratings between zero and 1200. The higher the number, the more trustworthy and creditworthy you’re considered to be.

Experian and Illion are the other two big credit reporting agencies in Australia, however they provide a different rating system to Equifax.

You can check your credit report and score for free every three months in some cases. If you apply for credit and the application is denied, you can also check your credit score for free.

There are plenty of places you can check your credit score for free using an online tool, or you can access your credit report directly from credit reporting agencies.

Checking your score is often as simple as filling in a short form with enough details that the organisation can identify and contact you:

• First and last name
• Email address
• Date of birth
• Home address
• Driver’s licence number

Generally, the easiest and most effective way to improve and maintain your credit score is to pay your bills and mandatory credit repayments on time. Also, if there are any errors in your credit file that may be negatively affecting your score, it’s a good idea to get them fixed.

Making your credit card repayments on time, paying down any outstanding balance and lowering your credit card limit could also help improve your score.

The other thing you can do to improve your credit score is stop applying for new credit. Applying for any kind of credit too often may lower your score. So, if you’ve applied for several loans or credit cards recently, try to hold off on applying for any additional credit for a few months which may allow your score to increase.

If you have any kind of loan or credit card, you’ll have a credit report that includes a history of your repayments over the last two years, along with details of those accounts and numerous other factors that can affect your creditworthiness. That information is used by credit reporting agencies to give you a numerical score that provides an easy way for lenders to assess how risky it would be to grant you a loan, and businesses to assess how risky it would be to allow you to buy something from them on credit.

You can check your credit score for free with some online tools to help you understand whether you’re likely to be granted a loan or credit. If your score is low, you can increase your chances of gaining credit approval by boosting your score. Making compulsory repayments and paying bills on time are some of the most effective ways of increasing your credit score.

If you need help managing your debts, you can find support and resources at the National Debt Helpline.