Frequently asked credit score questions

There are three credit reporting bodies who provide credit scores to credit providers. Each credit reporting body has their own way of calculating their score, so your credit score is not the same across the three credit reporting bodies. 

Your credit score is a snapshot of the strengths and weaknesses in your credit report, as interpreted by the credit reporting body. If you have a good record of making loan repayments on time, your score is likely to be much higher than if you have missed repayments. Your credit score is determined by a credit reporting body from information on your credit report (except for financial hardship information that cannot be used to calculate your credit score). 

It’s important to remember that a credit score is not the only thing a credit provider looks at when considering whether to give you credit. In fact, some credit providers may not look at the score at all. Either way, all credit providers will also look at your financial situation (including income, expenses and other existing debt) before deciding whether to approve credit.

There are two main reasons for differences in scores between the three main credit reporting bodies:

1. Their score range is different. For instance, Experian’s score range is 0-1000 with a score of above 600 being good, Equifax’s range is 0-1200 with a score of above 661 being good, and illion’ s range is 0-1000 with above 500 being good.
2. The information held by each of the credit reporting bodies differs, as not all lenders provide their information to all three credit reporting bodies. Remembering the credit score is simply a reflection of the underlying information, then this means the score will be better or worse depending on what information is held by the credit reporting body and the formula used by the credit reporting body to determine the score.

It’s important to note that your credit score can change over time if the formulas are changed (even if your information hasn’t really changed).

To answer this question, it is probably important to take a step back and better understand what a credit score is, and how it is used. Credit scores reflect what is happening with your credit accounts and behaviour. They provide a useful gauge about how things are going, but you should remember that if you really want to understand what is going on, you need to look beyond the score and get a copy of your credit report.

When you got home loan, your bank would have looked at a range of information which may have included your credit score, but also your credit report and records which showed your income and how you manage your expenses.

Even when you continue with that home loan, and you build your bank balance, understanding how you manage your credit (whether by the ‘quick sense check’ credit score, or the more detailed credit report) will remain important. Here are a few reasons why:

Your circumstances change: for instance, what happens if your home loan interest rate increases after expiry of a fixed term, and you can’t afford the ongoing repayments. You may need your lender to provide a more-favourable interest rate, or you may need to reach out to other lenders to see what refinance options are available. A good credit score, as well as a credit report which shows positive payment behaviour, could be critical to securing a good interest rate or a refinance.

Future borrowing needs: Even if you have a house and money in the bank, you may still need credit in the future for various reasons. For instance, you might want to take out a loan for home renovations, start a business, or invest in other ventures. Your credit score will be one of the factors (with your credit report, income, expenses etc) used by lenders in determining the terms and interest rates for these loans.

Utility services and mobile phone contracts: When setting up utilities such as electricity, water, or gas, or when entering a mobile phone contract, providers may check your credit report and credit score.

It's important to maintain a good credit behaviour (and in turn, a good credit score) even if you currently have assets and savings. By responsibly managing credit and maintaining a positive credit history, you can ensure financial flexibility and access to better terms and opportunities in the future.

Credit scores are not universally shared across countries. Each country has its own credit reporting system and credit scoring models. When you move to a different country, your credit history from your previous country typically does not move with you.

If you move to a new country, it's advisable to establish your credit history there by opening accounts, making regular payments, and building a positive credit report. Over time, your creditworthiness in the new country will be based on your financial activities within that new country.

Card churning, which involves opening and closing multiple credit card accounts can have both positive and negative effects on your credit score. It is important to consider why you are card churning and whether you are doing it simply to take advantage of offers from other credit card providers, or whether you are struggling to meet your repayments on your ongoing credit card balance. If the reality is that you can’t afford your regular repayments without an introductory offer, you may need to consider if you are experiencing financial hardship, and whether you should be reaching out to your lender for help, rather than finding another credit card.

In terms of how it can impact your score:

Credit enquiries: When you apply for new credit cards, the card issuer typically performs a hard enquiry on your credit report. Multiple hard enquiries within a short period can temporarily lower your credit score. However, the impact of enquiries is typically small and diminishes over time.
Average age of accounts: The age of a piece of information may impact your score. So, you may not see any change to the data on your credit report but might see a shift, a decrease or increase, in your score.

Considering your specific situation – and of course remembering the importance of reaching out for help from your lender if you are experiencing financial difficulty, if you're not planning to buy a house or apply for a loan in the next five years, the short-term impacts of card churning may be less concerning. However, it's essential to evaluate the potential long-term consequences and weigh them against the benefits you receive from churning credit cards.

It’s not necessarily the case that not having any debt will give you the best credit score. It’s all about whether any information in there shows a good track record of making payments on time and having a healthy relationship with credit. It is possible to manage your finances without actively monitoring or focusing on your credit score.

However, it's important to note that there can be instances where not having a credit score or neglecting your credit history may create challenges.

For example, if you decide to finance a home, buy a car, or take out a loan for business purposes, a good credit report and credit score will help you secure better interest rates and terms. Without a positive credit history, lenders may be more cautious, and you may face higher borrowing costs or even difficulties obtaining a loan.

It's advisable to strike a balance between focusing on debt reduction, investments, and maintaining a healthy credit report. This can be achieved by using credit responsibly, making timely payments, and periodically reviewing your credit reports for accuracy, even if you're not actively seeking new credit.

If you find information on your credit report which you think may be incorrect:
Firstly, obtain a copy of your credit report: Request a free copy of your credit report from each of the major credit reporting bodies—Equifax, Experian, and illion. You can access a free copy of your report from each of them every three months.

Review your credit report: Carefully examine your credit report from each credit reporting body and identify the incorrect enquiries. The enquiry section will typically list all the companies that have accessed your credit report (when you applied for credit or a loan) within the last 5 years.

You should contact your credit provider or the credit reporting body first and ask them to explain why the information is on your report. Typically, to satisfy yourself the information is correct, you should be certain that you have applied to the credit provider listed on the enquiry for credit. The credit provider also must notify you before they got your credit report to assess your application (this is what the credit enquiry shows). You don’t have to provide written consent for that to occur. If you’re not satisfied with their explanation, tell them why and request it is corrected. As set out below, you can speak to any credit provider or credit reporting body who holds your credit information (not just the organisation responsible for the incorrect information) to ask them to correct it for you.

If the information is incorrect, it will be taken off or changed (depending on the circumstances). If they don’t agree that the information is incorrect, they’ll provide reasons why the information is correct.

The credit provider or credit reporting body must respond to you within 30 days - unless you agree to extend that period. Once the matter has been investigated, you must be provided with a written response indicating whether a correction will be made (and if not, why not).
To help ensure that your complaint is dealt with quickly by a credit provider or credit reporting body, it is always a good idea to provide them with the documents or information that shows an error has been made. Provide it as early as possible, as it may be critical to having the correction made.

Credit scores are but one of the factors which lenders use to verify your information and work out whether to lend money to you.

There is other information which lenders will also consider: the information on your credit report, income information and information about your expenses, which may include looking at payslips, and transaction statements.

Lenders check this information because they need to verify whether you can afford to pay loans without experiencing financial difficulty. Loans which may carry higher risks – for instance, loans which must be repaid in a short period such as payday loan, or home loans which will be in place for a long time – are likely to involve a level of greater verification by a lender.
You can expect then where greater verification is required, all your supporting information matters, not just your credit score.

Lenders will all have different approaches to lending. Some have credit scores provided to them by credit reporting bodies, others will create their own credit scores based on information they hold and formulas they use. There is no ‘magic’ to it; your credit score is ultimately a reflection of your underlying credit information. While your score may differ between different credit reporting bodies, to ensure that you are presenting the best possible information to support your lender’s decision we suggest you understand your credit report itself, and your own credit health.

To begin with, a missed payment is not necessarily a ‘black mark’ on your credit report as a missed payment is highly unlikely to preclude you from applying for credit. The good thing about the comprehensive credit reporting system in play is that each payment you make on time will help build your good credit history.

Your credit report includes a 24-month history of your repayments, showing for each month whether you made your scheduled repayment on time, and if not, then how far behind you were.
A missed payment will only be included if you are at least 14 days late. So, if you forgot to make the payment but catch up within a couple of days, your credit report will show that you made the payment on time.

In terms of how long it takes to be reported, this will vary depending on the credit provider but generally where a credit provider reports repayment history, they do so at least once a month if not more frequently. So, you can expect that within a month or less of you being more than 14 days late in missing a payment, this will show up on your credit report.

A more serious missed payment is a default which is a payment which is 60 days past the due date. There are rules that credit providers must follow before listing a default (including sending you at least two written notifications about the debt and not listing any overdue payments less than $150 or that are statute barred).

Consumers have rights to access their own credit reports and credit ratings for free. The fact that a consumer accesses their own information is only ever made available to the consumer; lenders won’t see it. Some organisations have taken to calling this a ‘soft enquiry’, but all it is, is the consumer or their representative accessing their own information.

By contrast, a ‘hard’ enquiry occurs when a lender gets a consumer’s credit file to help them assess a credit application made by the consumer. A credit enquiry records when a consumer has applied for credit and can include the name of the credit provider, the type and amount of credit applied for.

Credit enquiries generally will have minimal impact on a credit score, particularly compared to other types of information such as repayment history information, or defaults.

Credit scores are calculated by the big three national credit reporting bodies - Experian, Equifax & illion. The credit provider that you apply to may use the credit score calculated by one of the credit reporting bodies, or they may create their own. 

These calculations turn the information in your credit report into a single number (except for financial hardship information that cannot be used to calculate your credit score). That number reflects how likely you are to repay new credit that you apply for (based on the credit reporting bodies’ analysis of how you have repaid previous credit). 

The higher the number, the more likely the credit reporting body thinks it is that you will repay that new credit.  

On any given day of the month, a credit provider could send new credit information to one or all of the credit reporting bodies. As soon as the credit reporting bodies update your credit report accordingly, expect that new information to be calculated into your credit score. This means there is no specific day when credit scores get updated; theoretically, they can update daily. 

Generally, the higher your score, the better. Every credit provider judges a credit score based on its own internal system and affordability and application risk rules.

No – credit providers like banks, credit unions and finance companies will look at your credit score, but they’ll also look at whether you can afford to repay the loan by considering your current income and expenses, including existing loan repayments. This is known as an affordability assessment. If the credit provider doesn’t think that you can afford to pay the loan back, they won’t approve you even if your credit score is high.

In addition, credit providers may also have rules about the types of loans they’re prepared to give. For example, if you are borrowing to buy a house, the credit provider will want to make sure the property being bought satisfies their rules (e.g. it’s not too small; it’s located in an acceptable area etc). 

Start early. The sooner you establish a good repayment history, the better – so if you plan to apply for a mortgage in the next few years, or take out a major loan, you should manage your credit health now by ensuring that you pay your bills on time, and there is no negative information such as a default listed against you for not meeting your debt obligations.

If you have been late or missed your payments in the past, it is important to get up do date and to continue to pay your bills on time. The longer you pay your bills on time after being late, the more your score should increase. Older credit problems count for less, so poor credit performance won't impact you forever and as good payment patterns show up on your credit report, credit providers will see that you are managing your credit well.

The way you manage your repayments on your credit and loan accounts is one of the top factors in most credit scoring models.  If you have been making repayments on your existing accounts on time, this is factored into your score, and it will impact your credit score positively.

Credit reports are usually updated frequently, however, there is sometimes a delay between when you perform an action and when it is reported by the lender to the credit reporting body, they report information to.  It's only when the credit reporting body has the updated information that it will impact your credit report.

Information that's added or deleted can affect your credit score.  And newer information tends to have more of an impact than much older information. In general, your credit score won’t change that much over time if your use of credit doesn’t change.  But it's important to note that each time your score is calculated it's taking into consideration the information that is on your credit report at that time. So, as the information on your credit report changes, your credit score can also change.

When you apply for a credit card or loan, an enquiry is recorded on your credit report. Your credit report shows a 5-year enquiry history, which is factored into your credit score.  Making multiple applications in a short period of time can negatively impact your credit score.

One application for a credit card is not likely to hurt your score but if you've applied for several other cards recently, it could make an impact as numerous applications could indicate to lenders that you're taking on too many accounts in a short period of time, a move that could make it difficult to afford all your new monthly payments. 

When you apply for a credit card, lenders want to know:

• how you've handled your existing debt,
• the number of accounts you have open, 
• whether you've made your account payments on time,
• if you have defaults listed against you for non-payment by other lenders,
• and the total amount of credit you have access to across your credit accounts and loans.

The total amount of credit you have is one factor affecting your credit score. The more credit you have, the more it will affect (and probably reduce) your credit score – but this could be offset by good repayment behaviour. Reducing the amount of credit you have may be good for your credit score – but again this is only one factor taken into consideration.

Your current credit report and the way you have managed your credit obligations to date will affect how a particular action may impact your score.