Credit scores 101

We're not down with assigning numerical ratings to people in real life, but it's essential in the lending world. We already know that your street cred is sky high, so rest assured that these ratings have nothing to do with your personality or your character. Rather, credit scores tell lenders how well-placed you are to honour the terms of a loan.

A credit score is a number lenders use to determine how likely you are to pay off a loan. The number sits in a range that differs depending on which credit bureau we're talking about (more on those in a bit).

Here are a few reasons credit scores are kind of a big deal:

Credit scores are generated by credit bureaus. Basically, they collect data relating to your history of borrowing and how good you are at paying your bills to paint a picture of your creditworthiness. 

In Australia, there are three major ones – Equifax, Experian and Illion. When assessing loan applications, lenders can request a credit report from one or more of these bureaus. 

So, not to freak you out, but that means you actually have three credit scores in Australia.

Credit bureaus calculate your credit score by donning sacred robes and chanting mystic hymns while sprinkling data into their bubbling credit score cauldrons. 

Okay, okay. Not quite. But, the exact way credit scores are calculated is kept under wraps. 

However, we do know the main information used to calculate your credit score:

• Past credit agreements. Such as utility contracts, credit cards, bank accounts, previous loans and phone and internet service. Details such as who offered the credit, any limits on it and whether it is currently open or closed are taken into account.

• Credit applications. All past applications you've completed are documented, even if they were unsuccessful.

• Your payment history. This includes if you've made repayments on time, had accounts in arrears or defaulted.

Credit bureaus also collect other information that's relevant to your repayment ability, such as bankruptcy filings and other legal information.

Getting your hands on a free credit report is pretty simple.

Each credit bureau is legally required to give you a free credit score check once every 12 months. You can also get a free credit report if a credit application has been rejected within the last 90 days.

Ready for us to blow your mind? You can see your credit scores – that's right, scores with an s – via our free credit check. Wisr is the only site in Australia that lets you check multiple credit scores in one go in just a couple minutes. If you have too much free time on your hands, or if you just like doing unnecessary work, you can always contact each of the credit bureaus individually. But ain't nobody got time for that.

Are you wondering what a good credit score looks like? Since all three credit bureaus use different scales, the numbers and tiers change slightly:

Equifax credit scores (0-1,200 range)

Experian credit scores (0-1,000 range)

Generally lenders prefer to loan to applicants who fall into the good category or above.

Even if you've stuffed up, you can still improve your standing with lenders. Like eating better, exercising and minimising your screen time, there's no time like the present to get started with this stuff. 

It could take a while to improve your score, but good things take time, so stick with it.

Feeling a bit better about the whole credit score sitch? We’re not even at the good bit yet. Here at Wisr, we like to reward good behaviour. Not with extra screen time or gold stars, but with lower interest rates for strong credit scores. By whipping up personalised loans for each applicant, we ensure you get the props you deserve.