A credit score check is often a source of anxiety for many people when applying for credit. A mandatory part of the application process for lenders, it can sometimes feel like an unfair assessment of your circumstances – and one that you have no control over.

The good news is that this isn’t true. illion, Equifax, and Experian are the three major credit reporting bodies that collect and store financial data about you. They collect this data to generate what is called your credit report and calculate your credit score, which lenders then use to assess how risky you are as a borrower. 

You can request your credit report for free once every three months from each of the major credit reporting bodies. But there’s an even simpler way to keep on top of your score!

At MONEYME, you can use our Credit Score tool to get a free, fast, and personalised credit check via the MONEYME mobile app. You will be able to see the same information that banks and lenders use to evaluate your creditworthiness, and you’ll also get access to tips and tricks to improve your score and special offers.

While it might seem daunting at first, understanding your credit score – and how it represents you to lenders – is the smartest way to improve your chances of a successful credit application. When you check your credit score in the app, you’ll get a comprehensive summary of the following:

• How much you have borrowed in the past
• Your repayment history for any credit cards or loans
• Any credit limits currently in place, e.g., on a credit card
• How many applications you’ve made in the past, and how regularly
• Any bankruptcies, defaults, or court judgements attached to your name
• An estimate of your ability to pay your bills on time

This data is assessed in various ways by credit reporting bodies, and your eligibility as a borrower is reflected in the corresponding credit score. Finding out ‘What is my credit score?’ and understanding patterns in your credit behaviours can be confronting at first, but a credit score check might be of help to you. That’s why MONEYME has created the tools to help you start shaping your financial future for the better.

What is the credit score range?

There are three main credit reporting agencies in Australia: Experian, illion, and Equifax. When a credit score check is requested, each agency has a slightly different way of reporting your score, but all use a ranking system to award a single credit score to their customers. Typically, this is between 0 and 1,000 or between 0 and 1,200. But what is a good credit score, and how do you get a good credit record? 

Simply put, the higher your credit score, the less risk you present to lenders – and the more likely they are to release credit to you at low interest rates. Your credit score is affected by your financial behaviours. 

A high score is typically achieved through consistent, timely repayments on your credit accounts, such as a mortgage, personal loan, or credit card, as well as bills. Showing lenders that you can be a responsible borrower over time will help you get a good credit score. 

If you have a lower credit score, you are likely going to be offered less credit at higher interest rates – or your application might be declined, depending on your specific circumstances. That’s because a low credit score generally reflects a history of missed or late payments, multiple applications for credit within a short period, or other inconsistencies related to your finances and debts. 

But a bad credit score isn’t all bad news. Thanks to Comprehensive Credit Reporting, your credit is now assessed based on more than just any blemishes you might have on your record. 

When a bank or a lender runs a credit score check on you, they’re now privy to your credit behaviours, as well as your existing credit accounts, credit limits, application history, and repayments. This means they’re able to assess trends in your credit behaviours.

For example, while you might have been through a rough patch eighteen months ago, they can also see you’ve demonstrated a history of consistent, timely repayments for the past twelve months. These are considered positive credit behaviours and help create a more positive – and accurate – borrower profile.

How to fix a bad credit score?

When a lender runs a credit score check on you, a bad credit score can impact the outcome of your application for credit in a few different ways. 

Depending on what credit behaviours are reflecting risk to the lender – e.g., missed payments vs multiple maxed-out lines of credit – you might get offered less credit than you’d applied for or a much higher interest rate than you’d hoped. Or you may simply be declined.

As tempting as it might be to try your luck until you get an approval, it’s important not to shop around and apply for multiple credit products within a short amount of time. That’s because every time you make an application for a line of credit, it’s recorded on your credit file. 

You should avoid having multiple loan or credit card applications with banks within a short period because they can damage your credit score significantly and make each future application even less likely to be approved. 

If you’ve run a credit score check and things aren’t looking as good as you’d like, learning how to improve your credit score is easy.

First, assess your current financial situation. If you’ve got upcoming utility bills or credit repayments you don’t think you can pay, it’s important to reach out to your provider before the due date. If you can put a payment plan or financial hardship arrangement in place, you’ll be able to prevent these late payments from impacting your credit report and credit score. 

Next, you can look at closing active credit accounts, such as a credit card or a loan, that you don’t need. Having a large number of credit accounts typically increases the level of perceived risk to lenders, so reducing your existing debt and access to credit limits could be a great way to start cleaning up your credit. 

However, the answer to ‘Will closing my credit card improve my credit score?’ is not a straight-up ‘yes’. It’s more of an ‘it depends’. Closing your credit card account could actually hurt your credit score, especially if you’ve had it for years and have been keeping up with your repayments. 

This is because a credit account in good standing shows lenders that you can be a responsible borrower. If you have no debts other than your credit card, closing the account would mean that you wouldn’t be able to maintain an active credit history, which could reduce your score. 

If you have multiple debts, consider a debt consolidation loan to minimise your monthly interest and repayments. Provided the single monthly repayment on your debt consolidation loan is lower than that of your current repayments, and you don’t end up paying out more over time due to a longer loan term, it’s likely the most suitable choice to help you become debt-free sooner. 

At the very least, it will put you in a better position to make regular, affordable repayments and demonstrate consistent, positive credit behaviours – the biggest keys to increasing your credit score, getting a better credit score check, and demonstrating you can balance and manage your debt.