How to understand your Experian credit score & report

Your credit score is a reflection of how reliable you are seen to be as a borrower. Experian is one of several major credit reporting agencies in Australia, and if you want to review your Experian credit score, you can ask for a report directly from them.

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What is Experian?

Experian describes itself as a global information services company that provides data and analytical tools to clients around the world. According to its website, Experian currently has over 12,000 clients internationally and aims to help individuals with their finances and to access financial services. It is one of the three biggest credit reporting bodies in Australia, along with Equifax and Illion, and lenders may consider your Experian credit score when deciding how reliable you might be as a borrower.

What is your credit score?

When you apply for a credit product such as a home loan, a credit card or a personal loan, the lender will generally use your credit score to help it decide whether you are a reliable person to lend money to. According to Experian’s website, an Experian credit score is a representation of how a credit provider may see the information on your credit history report. Your credit score is not fixed, however – it can go up and down over time – and it is only one factor lenders consider when assessing a credit application.

How can you order a copy of your Experian credit report?

One of the financial services that Experian provides is a free credit report. This report includes information such as your credit history, the credit accounts you hold and your Experian credit score. According to Experian, you can order a free copy of your credit report once every three months. In order to provide you with a copy of your report, Experian will need to check and verify your identity. Your report can be ordered online through the Experian website, and you will need to provide an identification document. Acceptable forms of ID include:

• Current Australian Driver’s Licence
• Current Australian Passport
• Australian Medicare Card (all versions)
• Centrelink Card (all versions)

Experian says that once you have provided the required information and submitted a request for your credit report, your information will be verified, and your request will be processed. You will then receive your free Experian credit report within 10 working days.

What is a good Experian credit score?

Experian rates credit scores on the following scale, from 0 to 1,000:

The higher your Experian credit score is, the more likely you are to be approved by a lender or credit provider, based on Experian’s calculations. This is because there is thought to be less chance of an adverse event, such as a default on your payments, within the next 12 months. However, as Experian states on its website, your credit score is “only a portion of what is considered” when a lender assesses your credit application, meaning other factors such as your income and wider financial situation can also be important.

Experian is one of several credit score providers in Australia, so your numerical ranking may differ depending on which credit reporting agency you go through.

How does Experian calculate your credit score?

Experian says it calculates your credit score by applying a statistical algorithm, which uses past events to predict future behaviour.

While each credit score provider uses a slightly different algorithm to calculate credit scores and may have varying assessment criteria, Experian says the key factors for generating a credit score include:

• The types of credit provider that have made enquiries on your report
• The type of product or products you have applied for
• Your repayment history
• The credit limit of each of your credit products
• The number of credit enquiries you’ve made in the past
• The number of negative events you’ve experienced, if any (such as late payments or loan defaults)

What can have a negative impact on your Experian credit score?

Experian also says that the following could have a negative impact on your Experian credit score:

• Making a large number of credit applications in a short space of time
• Having open accounts with debt collection agencies
• Taking out short-term credit, such as payday loans
• Defaults or missed payments
• Bankruptcy actions
• Court judgements

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How can I improve my Experian credit score?

If you are looking to improve your credit score, Experian recommends taking the following steps:

• Make payments reliably: Consistently making your mortgage, loan and credit card repayments when they’re due will help to strengthen your credit score. If you do miss a payment, Experian suggests ensuring that you catch up within the 14-day ‘grace period’ before it is reported as a default.
• Avoid multiple late payments: Consecutively missing payments and paying bills late can negatively impact your credit score. If possible, avoid missing payments to the point where debt collection agencies become involved.
• Avoid negative entries on your credit report: Negative entries such as defaults, court judgements, having open accounts with debt collection agencies and excessive credit enquiries may also have a negative impact on your credit score.
• Regularly check your credit report: Regularly check the information on your credit file to ensure that the new data that is included in it is correct.

Experian says that improving your credit score takes time and careful management, but adds that the higher your credit score, the better your chances are of getting your credit application approved.

To find out more about credit scores, how they work, and the impact yours could have on your finances, visit our credit score information hub.

Original reporting by Eliza Parry-Okeden. Cover image source: gpointstudio/Shutterstock.com