Saturday 18 November 2023

Credit Scores in Australia

A 'credit score' (or credit rating) in the US is a common concept, as ubiquitous as a SSN (social security number). Australia didn't have the equivalent until fairly recently, with loan applications being assessed by individual lenders, and little sharing of credit information about individuals.

This changed in recent years and now (according the the Australian government 'moneysmart' website)

"Lenders use your credit score (or credit rating) to decide whether to give you credit or lend you money. Knowing this can help you negotiate better deals, or understand why a lender rejected you."


"You have a right to get a copy of your credit report for free every 3 months."

and that

"Your credit report also includes a credit rating, This is the 'band' your credit score sits in (for example, low, fair, good, very good, excellent." have

But it is worth noting that a credit rating isn't the same thing as a credit score.

For example, I was interested in checking my credit report and score, so I created a free account with Equifax and received my free report. I checked that it was accurate, and found that my total 'credit limit' was $1,029,995.00 (mostly the mortgage for my investment property) and my score was 'Excellent'. But the free report didn't provide my actual credit rating, with Equifax indicating that the 'excellent' corresponded to a rating in the band 853-1200. When I clicked on the link to see my credit score, it offered me a paid subscription.

According to moneysmart:

"Depending on the credit reporting agency, your score will be between zero and either 1,000 or 1,200"

To get my actual credit score I installed the free app from ClearScore which provided the credit score from two agencies: Illium and Experian.

The differences were quite intriguing. Illium's score was 999/1000 and gave the Australian average score as being 695 and the NSW state average as being 690.

Experian gave me a score of 920/1000 with the Australian average being 783  and the state average being 782.

The app suggested that I could improve my score by building my repayment history, as it said I didn't have a credit account more than a year old. So they obviously don't count the mortgage or personal loan accounts. So closing down all my old credit cards in January to get my investment property mortgage approved apparently reduced my credit score. Go figure.

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