Five Facts You Might Not Know About Your Credit Score

With the shift to comprehensive credit reporting in Australia earlier this month, now is the time to step up your knowledge about credit scores. Here are some interesting facts (some useful, and some downright quirky) you may not yet know on this topic.

1. Checking your own credit score won’t affect it

One of the more common misconceptions about credit scores is that checking yours will lower it – this is not true. You can ‘soft check’ your own credit score through a credit reporting agency like Equifax as many times as you like and it will have zero impact on your credit score. What could affect your credit score is when a bank or credit provider makes an inquiry on your credit report before deciding whether or not to approve you for a loan or credit product. This is known as a ‘hard check’ and is recorded as part of your credit history.

2. Credit scores could be a way to screen possible partners

A 2015 study conducted by the US Federal Reserve Board investigated how credit scores affected long-term relationships. After following several couples for 15 years, the study found “the initial match quality of credit scores is strongly predictive of relationship outcomes in that couples with larger score gaps at the beginning of their relationship are more likely to subsequently separate”. The short version is if your partner’s credit score isn’t too far from yours, this might just be a good thing for your relationship.

3. Not all missed repayments are created equal

While a late or missed repayment of any kind could leave a mark on your credit history, the size of the stain and the time it spends as part of your credit history will depend on the nature of the repayment you missed. We go into detail here, but the long and the short of it is:

  • A late payment (more than 14 days late past the due date) will stay on your credit report for up to two years
  • A consumer credit default (more than 60 days overdue on an amount of $150 or more) will stay on your credit report for up to five years
  • A serious credit infringement will stay on your credit report for up to seven years. This is the same as a consumer credit default but:
    • The lender has now sent a written notice to your last known address
    • You have not contacted them or paid the debt
    • The lender has waited six months after sending notice, and then listed the infringement on your credit report

4. A good credit score might save you thousands

Having a better credit score can make you eligible for better loan products, or at least better interest rates on the same product. While a fraction of a percent may not seem like a big deal, over the course of a lifetime you’ll potentially take out and pay off a handful of mortgages and large loans, and a difference of say, 0.5%, on the best part of a million dollars in loans could be significant.

You should always be looking to pay as little interest as possible – making responsible use of a balance transfer could be a good way to manage your debt and make it easier to pay it off by incurring less interest.

The table below displays a snapshot of credit cards with 0% balance transfer offers on Canstar’s database, with links to providers’ websites. These results are sorted by the length of the 0% balance transfer period (longest to shortest), then provider name (alphabetically).

5. Credit reporting has become much more consumer-friendly lately

Late in 2017 the Australian Government announced it would be making Comprehensive Credit Reporting (CCR) mandatory. We’ve got a whole article which explains the ins and outs of CCR which you can read here, but the key thing to take note of is that CCR takes good behaviour into account.

Before CCR was introduced, credit reporting only recorded when you did something wrong – got denied a loan, missed a repayment, etc. CCR however, records positive aspects of your credit history, including things like how good you are at meeting repayments. This means that credit reports are now more thorough, and paint a more complete and nuanced picture of your borrowing/spending habits.

At the end of the day, your credit score isn’t something you should be afraid to get familiar with. Find out as much about it and credit scores in general as you can, and remember, it won’t hurt to check it! You can find out more about credit scores by clicking the link below.


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