Everything you need to know before doing a credit rating check

"Everything you need to know before doing a credit rating check"

Are you wondering how to do a credit rating check?

Are you in need of a cash loan? You might be looking for a small loan provider or an online lender who can lend you cash. Cash loans with Jacaranda Finance can be repaid within a period of several months as per the predetermined repayment cycle agreed upon between the lender and the borrower. However, before lending you money, lenders will be interested in doing a credit rating check on you to assess your creditworthiness. If you don’t know about credit scores and how they affect you, don’t stress, you’re not the only one. Fortunately for you we’ve provided a guide to understanding, checking and improving your credit score! 

Can I Check My Credit Rating for Free?

A credit rating is a numerical score that shows lenders your trustworthiness as a borrower. The higher the credit rating, the more your creditworthiness! Your credit rating is a number reached by summing up the information on your credit report. 

Your credit rating determines the amount of credit you are eligible to receive as a borrower. This is your credit limit. This information helps lenders decide whether you are worthy of borrowing money. 

Your credit score is calculated based on your present situation and past credit behaviour. This may include overdue debts, repayment history, credit limits, frequency of loan applications, and the type of loans applied for.

Checking your credit score is free and easy to do! You can get a copy of your credit history to see your credit score and check for any inaccuracies. Besides, if any of your credit applications have been declined in the part, you may want to check your credit file and credit score.

What is a Credit Rating Check?

A credit score or rating is a three-digit number or value that is determined from the information in your credit report. The value usually ranges from 0 to 1200. It tells lenders if there is any potential risk in giving you credit. It also gives them a deeper insight into your ability to repay loans. 

When you apply for a loan, the lender will be interested in doing a credit rating check. A company does a credit search to assess information from your credit report in order to understand your financial behaviour. Ideally, the following lenders may do a credit search on you:

  • Credit providers
  • Employers
  • Banks 
  • Utilities suppliers 
  • Landlords and other letting agencies and landlords

A credit rating check involves checking your credit history to find 

  • Whether you have repaid your previous loan on time
  • If you still have some credit left
  • How much credit do you have 
  • If you have any financial associations and their credit history

In Australia, the terms credit rating and credit score means the same numerical score and are used interchangeably. Checking your credit score is a good habit and does not affect your credit rating. In fact, if you check your credit score regularly, it is a good way to improve your credit. Regularly checking your score may help you catch any potential fraud or errors and take initiatives to resolve them.

A typical credit score is based on:

  • Payment history – Did you repay credit accounts on time?
  • Amounts owed – Is there an outstanding debt still? What is your credit limit and total amount of loans?
  • Length of credit history – How long have you had credit?
  • Credit mix – What type of credit products do you have? Do you have mortgage loans, instalment loans, credit cards, and finance company accounts?

 In Australia, it is important to check your credit report to know your credit score regularly. When you apply for credit, the lender checks your credit file and assesses your affordability. 

How do I check if I have bad credit?

The only way to find if you have bad credit is to do a credit rating check. You can check your credit rating for free using the national credit reporting bodies listed below:

  1. Credit Simple
  2. Equifax Australia (formerly known as Veda)
  3. Experian
  4. Get Credit Score

Bad credit shows up in your credit report in the form of heavy debt, loan rejection, negative repayment histories, defaults, and similar risky borrowing behaviour. If more than one negative listing shows up on your credit report, lenders will consider you as a person with poor credit.

A poor credit score indicates a high likelihood of an adverse event in the coming months. However, a “bad” credit score does not necessarily mean you cannot borrow money. It does not keep you from approval for loans and credit cards. However, you might be offered higher rates and terms compared with a person with a higher score.

What is a good credit score in Australia?

Your credit score directly affects your potential to borrow, which influences how lenders see you when you apply for a loan, mortgage, or credit card. 

In Australia, an excellent score falls between 800 or above and a score of 740-799 is considered very good. Someone with a good credit score is not considered as risky to lend to.

Very Poor:  579 or below
Average: 580 – 669
Good: 670 – 739
Very Good: 740-799
Excellent: 800 or above

Good for your credit rating

  • Making timely bill payments
  • Rarely applying for loans or credit cards                                  
  • Making timely monthly payments
  • Paying off all outstanding debts
  • Having a higher credit limit compared with your credit balance

Bad for your credit rating

  • Applying too often for credit cards or loans
  • Being rejected for a loan/credit card 
  • Delaying payments on credit card 
  • Applying for multiple balance transfer credit cards 
  • Deferring loan repayments
  • Overdue payments of at least $150 for 60 days or longer
  • Failure to repay balance transfer credit card long after the promotional interest rate period

You can visit the Tippla website for more factors that affect your credit score.

Is it ok to check your credit score?

You should regularly check your credit score. This should give you an idea as to what sort of activity made your credit rating less than favourable. You should consider the following to avoid any such pitfalls that can damage your credit:

  • A credit history of late, missed payments
  • A history of no payments
  • Not checking your credit report
  • Defaulting a credit account
  • Holding too many credit cards 
  • Not disputing errors on your credit report

How can I quickly raise my credit score?

A bad credit score may take some time to become better. But with a good score, you can get plenty of financing options and are eligible for better borrowing terms. 

  • Consolidate your debts: 
  • Make sure to pay your bills on time: When lenders review your credit report, they’re eager to find out how reliable you are paying your bills. Past performance is usually a good indicator or future performance ensuring you’re on top of your bills every month is important to improving your credit score. 
  • Carry a balance of 30% or less on your credit card accounts. 
  • Do not hastily close down unused accounts. It is a misconception that having only newer accounts will give you a higher credit score. Rather, lenders are interested to see a long history of credit.
  • Wait for your credit score to improve before opening new accounts. Remember, applying for credit creates a hard inquiry on your credit report which can lower your score. 
  • Do your credit rating check to stay on top of your financial well-being.
  • It’s important to report and dispute any inaccuracies on your credit report to make sure all the information is correct. 

What makes you have bad credit?

A bad credit score reflects on your credit rating, thus influencing your borrowing potential. Some of the common causes of a bad credit rating include:

  • Identity theft and financial fraud
  • Failure to comply with your credit agreement
  • Paying minimum on your credit card 
  • Declare bankruptcy
  • Choosing the wrong credit card
  • Having no credit rating

Here are the warning signs of an impending bad credit report:

Rejected credit card applications – If you have a history of not making timely payments, lenders might be apprehensive of lending to you. A history of rejections reflects on your credit report.

Account closed by a lender – Your creditworthiness could be at risk if a lender shuts down your account or lowers the credit limit and raises the interest rate.

Low credit limits – Lenders tend to charge higher rates if they do a credit rating check and apprehend that there is a risk of missed or late payments.

Calls from debt collectors – There is a high risk that a debt collector may ding your credit score if they have been calling repeatedly about a legit unpaid balance.

Ready to Apply?

Now that you’re up to speed with all things credit score checking, are you ready to apply for personal finance? If you answered yes, then we might know a guy! Jacaranda Finance is an award-winning lender in Australia that prides itself on offering loans up to $10,000. We believe a mistake you made up to 7 years ago should not necessarily influence your financial well being. That’s why we’re a proud offer loans to people with bad credit as long as they can comfortably afford the repayments. So what are you waiting for? Apply online today!

If you have any questions, don’t hesitate to contact us. We may be 100% online, but behind the screen is a whole team of friendly loan specialists on hand to answer your enquiries. Ask us anything and our customer service team will do their best to help!

*most people have their money in their bank account once they are approved and have accepted their contract within 60 seconds. However, it will depend on your individual bank.