How to understand your credit score using Credit Savvy

Companies such as Credit Savvy allow consumers to check their credit score and generate a report, which can be helpful to see before applying for a loan. Let’s take a closer look at what Credit Savvy offers consumers and how to interpret the score it gives you.

What is Credit Savvy?

Working with Experian (one of the three major consumer credit reporting companies in Australia), Credit Savvy describes itself as a “consumer initiative” that allows Australians to access their credit score and credit report for free. The company also offers consumers resources to help understand credit scores and how to improve it, if it is considered low. It is operated by CBA New Digital Businesses Pty Ltd, a wholly-owned subsidiary of the Commonwealth Bank.

According to Credit Savvy, “Your credit score is a numerical representation of how you’re viewed from a financial point of view.” Understanding credit scores can be beneficial, as many aspects of finance are at least partially decided by this number. For example, banks and other lenders often use credit scores to help them figure out whether or not you are a good candidate for a home loan or how much your credit card limit should be.

Once you find out your credit score, Credit Savvy says it will provide monthly score updates so you can keep track of your score over time. It says it will also send you a credit alert if there are any “key changes” to your credit report.

What is a good Credit Savvy credit score?

Credit Savvy uses the Experian credit score model, meaning the score you receive will be between 0 and 1,000, with higher numbers representing better scores. Your credit score will also fall into one of five tiers, which range from ‘Below average’ to ‘Excellent’.

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As a general rule, the higher your score, the higher the chance a lender will approve your loan application, as the probability of missing a payment would be considered low. However, keep in mind that different credit reporting agencies and lenders may calculate your score differently or have different thresholds for what constitutes a ‘good’, ‘very good’ or ‘excellent’ credit score.

If you want to either maintain or improve your score, there are several ways to do so, such as paying your bills on time and taking steps to pay back any existing loans.

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How does Credit Savvy calculate your credit score?

According to Credit Savvy, the credit score it gives you will be “calculated by an algorithm that uses information from your credit file.” It adds that “patterns in your credit history, characteristics of your credit profile, and aspects of your credit applications” are all used when generating your number.

Credit Savvy explains that patterns in your credit history can include:

• Shopping around to different credit providers and making numerous applications. Credit Savvy says doing so within a small time period is generally “less favourable” for your credit score than making “infrequent and fewer credit enquiries”.
• How many credit enquiries you’ve made. This number is calculated over a period of time, with enquiries often weighted differently depending on how long ago you made them. Credit Savvy notes that recent credit enquiries tend to have a larger impact on your score than older ones.
• Any negative information, such as loan defaults or bankruptcies, which can adversely impact your credit score.

Characteristics of your credit profile can include:

• Personal details like your age, how long you’ve been employed at your current workplace and how long you have lived at your current address.
• How old your credit history is. Credit Savvy states that someone with a longer credit history may have a “different level of risk” in lenders’ eyes to someone with a more limited history.
• If you own or are a director of a company or business, the history of the business may also be a factor, including where it is located, how long it has been there and its credit history.

Aspects of your credit applications can include:

• The type and amount of credit you asked for in any previous applications.
• The credit providers you’re already with or have been with previously, as each type of provider has a different level of risk – a loan from a payday lender, for instance, may be seen as riskier than one from a bank.

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.

Credit Score Information Hub