CREDIT MADE SIMPLE - Credit Savvy

CREDIT MADE SIMPLE

THIS HANDY LITTLE GUIDE EXTexhPpisLloOhreaRsndEthySelibTtatHlseiEcgsuBoidfAecSreIdCitS OsFcoCriRngEaDnIdTcreSdCitOreRpoINrtiGng AiNnDAuCstRraEliDa.IT REPORTING IN AUSTRALIA.

TABLE OF CONTENTS

CREDIT SCORE BASICS.......................................................4 HOW IS YOUR CREDIT SCORE CALCULATED?..............6 WHAT IS INCLUDED ON YOUR CREDIT FILE?...............7 CREDIT SCORE MOVEMENT............................................10 HOW CAN YOU IMPROVE YOUR CREDIT SCORE?......14 CHANGES COMING TO CREDIT ......................................16 COMMON QUESTIONS.......................................................18

4

CREDIT SCORE BASICS

What is a credit score?

A credit score is a number (typically between 0 and 1,000) that represents your credit worthiness in the eyes of a credit provider. It is based on the information in your credit file and indicates the likelihood that you will be able to repay credit in the future.

How are credit scores used?

Credit providers can use your credit score and your credit file, along with information in your application for a credit card or loan, to determine whether to offer you credit. If you have a high credit score, it suggests that you have demonstrated a history of financial responsibility and can be considered to be less risky to lend to than someone with a lower credit score. There are also a number of credit products that offer lower interest rates for people with higher credit scores, so a good credit score could lead to a better deal on credit.

If you have a high credit score, it suggests that you have demonstrated a history of financial responsibility and can be considered to be less risky to lend to than someone with a lower credit score.

6

HOW IS YOUR CREDIT SCORE CALCULATED?

A credit score is calculated by an algorithm that uses information from your credit file. It looks at patterns in your credit history, characteristics of your credit profile, and aspects of your credit applications.

Who calculates credit scores?

A credit reporting body (CRB) collects, uses and discloses personal and credit related information about individuals. A CRB collects this information from credit providers and publicly available sources.

A CRB processes this information to report on the credit worthiness of an individual. It's important to note that a CRB does not approve or deny credit.

There are a number of CRBs in Australia and each maintains their own set of consumer credit information. As a result, your credit file and credit score at each CRB may vary as they can have access to different data. It is a good idea to check with each CRB to get a more complete picture of your credit reputation.

WHAT IS INCLUDED ON YOUR CREDIT FILE?

Below are some of the key things found on credit files

Credit Enquiries:

When you apply for a credit product, if a lender does a credit check on you, a credit enquiry is recorded on your credit file. This can include any credit card, loan, or utilities applications you may make. The enquiry is recorded on your file for 5 years regardless of whether your application was approved or rejected. Having a large number of credit enquiries on your file over a short period of time can make you appear less favourable to credit providers, as they may assume other lenders have declined you or that you already have a lot of debt.

Credit Topics:

There are many types of credit available and each has a different level of risk. Your credit score accounts for both the type and amount of credit in your previous applications. Likewise, each credit provider has a different level of risk. e.g. an application with a payday lender is seen differently to a bank or credit union.

8

Defaults and other adverse events:

A default is recorded on your credit file if your payment of $150 or more is overdue by 60 days or more. A default is kept on your credit file for five years, even after the amount has been repaid.

Additionally, if you have declared bankruptcy or had serious credit infringements or court judgements against you, it can be recorded on your credit file. This type of negative information on your credit file can adversely impact your credit score.

WHAT ISN'T INCLUDED?

Your credit file (and therefore your credit score) does not take into account your income or assets. Earning a large salary or owning a lot of property does not have any bearing on your credit score.

Australia's credit reporting system is moving towards a `positive' reporting system, however the process will take time. At present, your credit file is unlikely to contain information on your credit limits, your repayment history or account open and close dates.

Earning a large salary or owning a lot of property does not have any bearing on your credit score.

 ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download