Do you know your credit score?
A credit score is a number that is calculated based on the information in your credit report, which helps credit providers (including banks) know how responsible you are to lend to.
It's a number that is between 0 and 1200, where a higher number means you are more likely to be able to repay the loan.
And despite almost every adult in Australia having a credit score, a recent survey by finder.com.au discovered that almost two thirds of Aussie adults don’t know their credit score.
However we are getting better at monitoring our credit score as the number of Aussies who do not know their credit score has dropped in the past 18 months from 80% to 61%.
Money Expert for finder.com.au, Bessie Hassan says although this trend is promising, it means — a number which could significantly impact their financial future.
Yet it’s alarming that there are currently more than 11 million Aussies who do not know their credit score, including 13% who don’t know it because they do know how or where to find it which shows there is a knowledge gap”
“Worse yet, some Aussies are being penalised for unknowingly having a poor credit score,” she says.
Ms Hassan says it’s vital to know your credit score because being clueless could cost you.
“Borrowers have a vested interest in improving their credit score as lower risk can equal lower interest rates from lenders, which could shrink the interest you pay on your repayments,” she says.
“finder.com.au recently compared the price of personal loans from 20 lenders and found the cheapest loans for borrowers with stellar credit came with an average interest rate of around 9.8%. However, those with a riskier credit profile paid as much as 19.6% interest.”
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“On a personal loan of $30,000 over five years, this could mean a difference in repayments of just under $10,000 ($9,221) in total or the equivalent of $154 more per month,” she said.
Preferential pricing for personal loans could become more prevalent with the introduction of Comprehensive Credit Reporting (CCR) from 1 July 2018 meaning knowing your credit score will be more important than ever from next month.
Ms Hassan encourages Aussies to not wait a minute longer and to check their credit score online.
“finder.com.au has offered free credit score checks since September 2017 and has recently upgraded its credit score checking service to give all Aussies a better understanding of how leaders perceive you.
“With a few simple clicks you can now access a comprehensive credit report with detailed information including repayment history, defaults or infringements and credit applications when you check your credit score.
“In addition, you can now check your credit score every month where previously you could only check it twice a year.”
“Furthermore, if you who’ve used the comparison site to check your credit score you will receive automatic alerts when there’s suspicious banking activity which may impact your credit score — one of the best parts, it’s free of charge.”