What is a credit score?
A credit score or credit rating is a figure calculated by credit bureaus to give an indication on how likely (or unlikely) you are to default on credit. The higher the score, the more credit worthy you appear.
Credit scores are used by financial institutions and influences their decision to make funds available to you.
Who are the credit bureaus?
In Australia we have three main credit bureaus and one state bureau.
The bureaus are Experian, Equifax (Veda), illion(Dun and Brad street) and Tasmainian Collection Service.
While it is not essential to belong to any credit bureau, many companies offering credit will belong to one or more of these bureaus.
Equifax is the largest credit reporting agency in Australia. Equifax, a leading global company acquired Veda in 2016.
In 2018, Dun and Bradstreet rebranded to illion. the illion website states that they will also rebrand their subsidury companiys to illion in 2019, this includes Proviso, TenderLink, TalkingTech, BitData, TINZ, Inteflow, and Index Partners.
Experian is a global information service that offers credit services. Experian started out as a marketing company in Ireland. Now they are listed on the London stock exchange and offer services around the world.
How is a credit score is calculated?
Credit scores vary within each credit agency.
Experian and illion have scores ranging from 0-1000, whereas Equifax ranges from 0-1200.
The actual calculation of your score depends on:
- Your personal details (such as age and where you live)
- The type of credit providers you have used (e.g. bank or utility company)
- The amount of credit you have borrowed
- The number of credit applications and enquiries you have made
- Any unpaid or overdue loans or credit
- Any debt agreements or personal insolvency agreements relating to bankruptcy
With the introduction of positive reporting in July 2018, lenders have a more comprehensive picture of your current credit practices. If you are not late on your payments, it is presented positively on your credit report. As this is a monthly report, anything you do to positively impact your credit score will immediately help you.
How do credit bureaus get your information?
The data that the bureaus collect can come from a number of different sources:
→Information reported to the bureaus by creditors
→Information collected or bought by the bureaus
→Information shared among the bureaus
Can I clean my credit score?
The short answer is – No.
A default on your credit report is there for 5 years. The only way a default can be removed is if it is there in error. There are agencies that claim to be able to clean your credit report and they will charge you to try, if they are successful, you will be charged more.
The way they do have success is by scrutinising the reporting companies procedures and if there is anything that is slightly out of line with credit reporting policy, they will present a case to have the default removed, or risk a report to ASIC.
There are multiple comparison companies that provide easy access to you credit score and some limited information on your credit report. These agencies have agreements with the credit bureaus to offer services and information on loans, insurances credit cards and services of the companies who use the bureau service.
Comparison sites are listed below with their associated credit bureaus.
Credit savvy – Experian
Finder.com.au – Experian
Credit Simple-Illion (dun and bradstreet)
Get credit score – Equifax
SL Accounting Services
blog site moneyhacks-au.com