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Credit Score

Your credit score is a number calculated from information in your credit report at a point in time.

This score is used by creditors like banks and lenders to determine whether you can borrow, how much you can borrow, and at what rates.

In Australia the main score used is your VedaScore provided by Veda, Australia`s leading credit bureau.

Credit scoring is not limited to banks. Other organisations, such as mobile phone companies, insurance companies and government departments have access to this information.

Understand your credit score

Your VedaScore is displayed as a number and indicates the likelihood of an adverse event being recorded on your credit file in the next 12 months.

An adverse event can be a range of “bad credit” listings such as a default, a bankruptcy or a court judgement.

The higher your VedaScore, the less likely it is an adverse event will be recorded on your file and the less of a risk you will appear to lenders.

The lower your credit score the riskier you will appear as a borrower.

  • Below average to average (0-509). It’s more likely an adverse event will be recorded on your file in the next 12 months. You are in the bottom 20% of Veda’s credit-active population.
  • Average (510-621). This score suggests that it’s likely that you will incur an adverse event in the next 12 months. Your score places you in the bottom 21-40% of the credit-active population.
  • Good (622-725). Adverse events are less likely to be recorded for the next 12 months. You fall in the mid-range (41-60%) of Veda’s credit-active population.
  • Very good (726-832). Unfavourable events are unlikely to be recorded onto your credit file within the next 12 months. Your score places you in the second-highest percentile range of the credit-active population (61-80%)
  • Excellent (833-1200). Adverse events are highly unlikely to happen within the next 12 months when compared to the average Australian. The odds of no adverse events occurring on your credit file in the next 12 months are five times better than the population average and you are in the top percentile range (81-100%).

How is your VedaScore calculated?

Your credit score is calculated using the information on your credit report and there are a number of factors that take into account your risk as a borrower. These include:

  • Type of credit provider. There may be different levels of risk when approaching different lenders. A non-traditional lender may have a different level of risk than a bank or credit union.
  • The size of credit requested. Both the type and size of the loan or credit limit you’re requesting can affect your VedaScore. Mortgages have a different level of risk compared to credit cards.
  • The number of credit enquiries. Every time you apply for a credit product, the credit provider obtains a copy of your file and the application is noted. If you’ve shopped around for credit and applied at a number of places in one space of time, it flags you as a higher risk. The pattern of credit enquiries over time also affects the level of risk.
  • Directorship information. If you’re a director or proprietor, it may impact your VedaScore so it’s important to check both the individual and commercial sections of your credit file.
  • Age of credit file. The date your credit file was created. A new file may indicate a different level of risk compared to an older file.
  • Personal details. Your VedaScore will consider your age, length of employment and how long you’ve lived at your current address.
  • Default information. Any personal or business credit such as overdue debts, serious credit infringements or clearouts could negatively affect your VedaScore.
  • Court writs. Default judgements or court writs may convey you as an increased risk and negatively impact your VedaScore.

How do I get a copy of my credit file?

You can receive your credit file from any of the main credit reporting bureaus in Australia.

You can order a free copy once a year and receive it in 10 working days, or you can pay a fee to access it in 24 hours as often as you need to.

Credit reporting agencies can also help you make sense of the information in your credit file and correct personal details that could be entered incorrectly. Should you find any erroneous listings on your credit file, you can request corrections or have notes added to the credit report to better your credit reputation and raise your credit score.

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About

Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


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