Understand your credit score & Tips to Improve

Your Equifax (most commonly used by lenders) Score is a number that suggests the likelihood of a”bad credit” listing such as a default, bankruptcy or court judgement being listed on your credit file in the next 12 months, this has also just expanded to show late payments on your monthly bills such as power/phone/internet.  Therefore a credit score can improve or decline each month.

The higher your credit score, the less likely it is a “bad credit” event will be recorded on your file, therefore the less risky you will appear to lenders. The lower your credit score the riskier you will appear as a borrower.

  • Below average to average (0-509).It’s more likely an adverse event will be recorded on your file in the next 12 months. You are in the bottom 20% of Equifax’s credit-active population.
  • Average (510-621). This score suggests that it’s likely that you will incur an adverse event in the next 12 months. Your score places you in the bottom 21-40% of the credit-active population.
  • Good (622-725).Adverse events are less likely to be recorded for the next 12 months. You fall in the mid-range (41-60%) of Equifax’s credit-active population.
  • Very good (726-832). Unfavourable events are unlikely to be recorded in your credit file within the next 12 months. Your score places you in the second-highest percentile range of the credit-active population (61-80%)
  • Excellent (833-1200). Adverse events are highly unlikely to happen within the next 12 months when compared to the average Australian. The odds of no adverse events occurring on your credit file in the next 12 months are five times better than the population average and you are in the top percentile range (81-100%).

How can I Improve my Credit Score & Chances of Finance Approval

You have 2 forms of credit score mostly used, one is your Equifax score and the other is a score the lender gives you based on their lending criteria.

There are a number of ways to improve your credit score which depend on what your current credit position is. However, here are a few:

  • Set up your monthly bills ie electricity, internet, phone etc on Direct Debit or put reminders in your phone for the day they are due – Credit Scores will now be effected by late bill payments.
  • Avoiding payday lenders as they suggest to other lenders you require extra money to live week to week
  • Reducing your credit applications (do not apply for credit for 6-12 months)
  • Making sure your repayments are on time will help improve your credit score and can help with a credit reference
  • If you are able to, you can also consider cancelling or reducing the limit on your credit cards.
  • Show good stability, ie in work and at home
  • Try to set up a savings account with regular contributions

Feel free to reach out to Amanda – your Kiwi Broker if you need any more info on above – not many of us realise how important a credit file is…

 

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