It’s one of the most important numbers in your life. No, it’s not your Mum’s birthday, or your boyfriend’s phone number (2+ years of dating and I still don’t know his number by heart).
The most important number you need to know right now is your credit score.
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What is a Credit Score?
Your credit score is based on your application for and repayment of debt. This includes the more obvious debt like a mortgage, car loan and credit card, but phone companies and other utility services also run credit accounts.
The credit reporting agencies receive information from these finance companies and add it to your credit file. Everything from new applications for credit to late bill payments (usually over 60 days late), missed loan repayments and defaults are added. Most of this information stays on the file for around five years.
The result is that your credit score can influence a whole heap of your financial transactions – from applying for a new loan or credit card, to signing up to a new mobile phone plan. If your credit score is low then you may only be able to get loans with higher interest rates, or you could be refused credit entirely.
However if you’ve got good credit, you are in a better position to negotiate with your lender and get better rates or payment terms.
Changes to the Australian Credit System
In March 2014, changes were made to the Australian credit reporting system. Previously, your credit report only contained ‘negative’ details – such as applying for credit or missing a payment. If you’d dutifully paid every single mobile phone bill on time since you were 19 it didn’t make a difference to your credit score.
The changes now mean that your credit report shows both negative and positive details. This is known as a comprehensive system and means that if your score isn’t great, you can now take steps to bump up the number.
A similar system is used by US credit reporting agencies to rank credit worthiness. It’s so widely utilised by credit agencies there that some singles will refuse to date someone with a bad credit score.
Now I’m not saying that you should judge a person based simply on their credit score. There’s plenty of reasons why someone may have a low credit score – from their credit file being quite new, to a (now resolved) financial problem that meant some bills were paid late. But knowing your credit score is the first step to fixing any problems that may impact on your financial decisions later – such as applying for a mortgage.
Checking Your Credit Score
The main credit agencies in Australia are Veda and Dun & Bradstreet. Both agencies maintain separate credit rankings so you’ll want to get reports from both companies to make sure you have the full picture of what’s on your credit file.
Veda use a ranking system known as your VedaScore, which scores your credit worthiness from 0 to 1200. A site called GetCreditScore.com.au allows you to check your VedaScore in under a minute. All you need to do is input some information to verify your identity, and it will automatically bring up your credit score. You can check your credit score once every 12 months, which is handy for keeping track of any changes.
I went ahead and input my details to get my score and in less than a minute I had my number – a very good ranking of 739. This number suggests it’s unlikely that I will have an adverse event in the next 12 months that could harm my credit report. Which, obviously, I’m thrilled about.
Once you’ve got your VedaScore, you can access your full credit report as well to double check there are no discrepancies. The Veda website spruiks their paid version, but they also offer a free credit report - the only difference being it takes 10 days to get to you. While you’re at it, you should also order your credit file from Dun & Bradsheet. Again, the free version takes a little longer to get to you. Ordering the reports from both sites should take you no more than 30 minutes, so get off Facebook now and go do it.
Once you’ve received your credit report, have a look through to see if there are any errors or discrepancies, which you can challenge with the credit agency. If it all looks peachy, then set a reminder in your calendar to check again in a year’s time.
Over to you. Have you ever found an error on your credit report? Do you know what your credit score is?
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The post Do You Know Your Credit Score (And Does it Really Matter)? appeared first on The Million Dollar Diva.