Whether you’re planning on becoming a home owner, or simply wanting to take out a new credit card, you may hear a few unfamiliar terms, including credit ratings.
There’s lots of talk about credit ratings, and how important having a good one is. But what exactly is a credit rating, how do you find out your credit rating, and why is it worth working towards having a good one?
A credit rating, otherwise known as a credit score, is a number that represents how reflects your reliability as a borrower. The higher the score, the more credit-worthy you are, and the more likely a lender, such as a bank, is to approve your loan or mortgage application.
In Australia, there are three main credit reporting bureaus who maintain credit files on individuals. Each time you apply for a loan, or miss a repayment, an entry is made in your credit file. These entries affect your credit rating, for better or worse. When you next apply for a loan, your current credit rating will indicate to the lender whether you are likely to repay the debt.
While each of the bureaus has slightly different rating scales, you can find out your credit score for free.
Refer to the below credit rating bands to determine the health of your credit rating:
It’s important to understand that, along with your credit rating, lenders also consider other factors including your age, length of employment and length of time at your current address. They are generally looking for stability, which would be considered along with your credit rating.
A good credit rating can lead to a range of benefits. You may want to consider:
There are a number of ways to improve your credit rating.
And make sure you seek financial advice before making any big decisions or changes that may affect your credit rating.