Thursday, 15 June 2017

Your Credit Score - why is it important?

Pacific and General

Your Credit Score - why is it important?

Reproduced with kind permission of ASIC's MoneySmart website. 

 Thank you to Joseph Liava’a for providing information for New Zealand.


Have you ever borrowed money...and crossed your fingers hoping your credit check comes back positive?

Well, you're not alone! 

 Having a good credit score helps lenders decide if they should lend money to you. Knowing your credit score can help you to negotiate a better deal with your bank or find an alternative lender that will reward your good credit history. Here is some information on how credit scores work and things you can do to improve it. 


 What is a credit score?

Your credit score is a number based on an analysis of your credit file, at a particular point in time, that helps a lender determine your credit worthiness. It is used by credit providers, such as banks and credit unions, to help them decide whether to lend you money, how much they will lend you and may sometimes influence what interest rate is offered to you.

 How is your credit score calculated?

Credit reporting agencies collect your financial and personal information and document it on your credit report This information is then used to calculate your credit score, which includes:

  • ¥ 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


The good news is that you can get a copy of your credit report for FREE, although it may not include your credit rating and may take a little longer to receive than if you paid for your credit report. 

 In New Zealand, follow these links for your free credit reports:


In Australia, follow these links for your free credit reports:


Please note that by obtaining your free credit score you may be agreeing to allow your personal information to be disclosed to third parties for marketing purposes. Ensure you read all terms and conditions and consider whether you want your personal information passed on for marketing purposes. You can opt out or unsubscribe where you do not want these details passed on.


You may need to check with more than one credit score provider to get a consistent and reliable measure of your credit rating.


Your credit score is dynamic, meaning it may change from month to month as your financial circumstances change.


 Protect Yourself from Fraud

You should check your credit rating and report to ensure your information is correct and that all the enquiries and listings on the report have been made by you. Criminals can steal your identity and take out credit in your name so checking the accuracy of your credit report is important. ASIC's MoneySmart website has further information on how to check your credit history on your credit report. 


How can I improve my credit score?

Your score can change even if your financial habits haven't. This could be due to a number of factors including:

  • ¥ Applying for a new loan or credit card
  • ¥ A listing on your credit report expiring
  • ¥ A change to your credit limit on an existing loan or credit account
  • ¥ New information from a creditor
  • ¥ Closing a loan or credit card account
  • ¥ Late repayments


Improving your credit rating starts with looking at your current financial situation and looking for ways to improve it. As your financial circumstances improve your credit rating will improve. Getting into a good credit position before you next apply for a loan can help increase the likelihood of you getting approved.

You can improve your credit score by:

  • ¥ lowering your credit card limits
  • ¥ consolidating multiple personal loans and/or credit cards
  • ¥ limiting your credit enquiries
  • ¥ paying your rent and bills on time
  • ¥ paying your mortgage and other loans on time
  • ¥ paying your credit card off in full each month


 Problems Paying off your Debts?

If you are looking for ways to pay off your debts, ASIC's MoneySmart website is a good place to start to find information to help you.


There isn’t much in life for free, but a credit report is one of them! Get a copy of yours so you know where you stand.


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