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Your credit rating – also known as your credit score – is something most people don’t think twice about until it comes time to apply for a home loan. But it’s something that a lender or bank will consider when assessing an application for credit.

So, what is a credit score?

Your score, or rating, is usually a number between 0 and 1,200 (sometimes the scale is capped at 1,000). It is calculated based on your financial history and provides a bank or lender with a guide to how much of a ‘credit risk’ you could be. The credit score takes into consideration your repayment history of previous loans that you’ve had over a certain period of time, your ability to pay bills on time, past loan amounts, your current debt, and the frequency of your credit applications.

Your credit rating forms a prediction of how likely you are to pay back a loan on time and the higher your ‘score’, the better. Having a higher credit score may improve your ability to obtain finance approval for a home loan, personal loan or a new credit card.

What is a good credit score?

It’s not just a case of a good or bad score, remember it’s a scale – and this scale can vary slightly depending on the credit bureau (reporting agency) being used. Each credit bureau or credit provider will calculate ratings using their own formulas and the information that is available to them.

Credit score ranges based on the three common credit bureaus in Australia:

Excellent     800 - 1,200
Very good 700 - 799
Average     500 - 699
Fair 300 - 499
Low     0 - 299

According to the average credit rating in Australia is 695.6, but this average varies between different age groups and genders.

How to check your credit score

There are a number of ways to find out your credit score, thanks to there being a number of websites and credit bureaus offering this service. We recommend visiting the CreditSmart website to find out more information on obtaining your credit score.

Before you start the process, ensure you have some different forms of ID ready. A passport or driver’s licence will definitely be required at some point.

Improving a credit score

If your credit rating is at the low end of the scale, don’t worry. There are some things you can do that will help improve your score – just remember that there isn’t a ‘quick’ fix.

Firstly, avoid defaults being added to your credit report by paying your bills and debts on time. Next, work out what you can change that will have a positive impact in the future. For example, reducing the limit on your credit card, if you don’t use the full amount, is a good place to start.

Seeking financial assistance will not impact your score, and CreditSmart is a great resource to use if you are struggling with debt or experiencing financial hardship.

When checking your credit report, ensure that there isn’t any incorrect information showing. For example, you don’t want any debt showing up that is associated to someone with a similar name (mistakes like this can occur occasionally). If you see something that doesn’t look right contact the financial institution, and bear in mind you’ll need to provide evidence that the debt doesn’t belong to you.

It’s important to note that every time you apply for credit, a credit enquiry will be made which will show on your credit report. This means each enquiry can have an impact on your score.

Ready to apply for credit?

Once you’ve checked your credit rating, you’re in a more informed position to apply for credit. Whether you need to upgrade your wheels with the help of a car loan, move out of your parents’ place into your first home or just need a new credit card, P&N Bank can help.

Contact us online, by phone or visit one of our local branches to discuss your needs.

Banking and Credit products issued by Police & Nurses Limited (P&N Bank) ABN 69 087 651 876 AFSL/Australian Credit Licence 240701. Any advice does not take into account your objectives, financial situation or needs. Read the relevant T&Cs, before downloading apps or acquiring any product, in considering and deciding whether it is right for you. The Target Market Determinations (TMDs) are available here or upon request.