Understanding your credit score

Thinking of applying for a personal loan to fund overseas travel, home renovations or a major purchase?

Your credit score often plays a big role in securing personal finance. To help improve your chances of approval, you’ll need to understand what a credit score is.

What is a credit score?

A credit score, or credit rating, is a number lenders often use when deciding if they'll lend to you, how much, and at what interest rate.

Credit reporting agencies score in different ways, but a higher score typically means you’re considered less risky to lenders and more likely to get a better interest rate.

Your credit score is accompanied by a rating of Excellent, Very good, Good, Average or Below average. Generally, a credit score above 660 is considered Good.

What is a credit report?

A credit report is a document containing a detailed record of your financial history, which is used to calculate your credit score.

It’s a comprehensive report including information such as the types of credit products you have, your repayment history, and any defaults on past rates, utilities or loans.

How to check your credit score and credit report

Checking your credit report is important to ensure its accuracy and determine how you’re tracking before you apply for a personal loan.

You can check your credit score by requesting your credit report from a credit reporting agency. You’re entitled to a free report every three months, accessible online in minutes.

Keeping your credit score in good condition

Credit scores change based on your financial behaviour. Here’s how to help keep yours in good shape:

• Check your credit report annually to ensure accuracy and fix any mistakes

• Pay rates and utilities on time to avoid defaults appearing on your credit report

• Pay off loans and credit cards on time, even if it's just the minimum amount

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