What Affects Your Credit Score?

Before you jump at “buy now, pay later” apps like Afterpay and ZipPay, do you know what affects your credit score vs what doesn’t? 

Your credit score (or your credit rating) will generally range from 0 to either 1000 or 1200, depending on the credit bureau calculating it. The higher the number, the more favourable potential lending providers will look at you when it comes to repayments or any potential defaults. 

Credit scoring weighs up multiple factors linked to your financial history, such as the types of loans you have applied for or have paid off, the total debt to your name, and an in depth look at your repayment history covering everything from phone bills to mortgages. However, when it comes to knowing what affects your credit score, there are some surprisingly good and bad factors to think about in order to present yourself as financially fit. 

Six Factors That Can Negatively Affect Your Credit Score

Having a good credit score is crucial if you want to obtain the right pre approvals for big purchases later in life, such as a car loan or a mortgage. In some scenarios, it can also allow you to access more favourable loan terms and interest repayments – so what do you need to keep an eye out for in order to stay in the best possible position? 

Late Repayments – The concept of a “late repayment” may vary greatly between yourself and your lending provider. Even if you are as little as fourteen days behind on paying your phone bill, this can be lodged on your credit file – and take years to remove. 

Too Many Credit Applications – If you shop around for credit and apply to multiple credit providers within a short timeframe, this can lower your credit score as an enquiry is added to your report each time you apply – flagging you as a risk for potential providers. 

Missed BNPL Payments – Interest free, “buy now pay later” platforms like Afterpay are seen as an ongoing line of credit, or debts that you could potentially have. While this can impact obtaining future credit, missed payments will also be lodged as a red mark on your credit file. 

Payday Loans – When calculating your credit score, credit reporting bodies generally look at the type of providers you have applied for credit with. Payday loans usually come with massive interest fees attached, and indicates that you may not be financially stable. 

Incorrect Contact Details – While your current address may not seem like a factor when it comes to what affects your credit score, having incorrect details listed greatly increases your chance of a miscommunication when it comes to staying on top of any repayment obligations. 

Not Checking Your Credit File – Unfortunately many Aussies only tackle their credit file once it’s too late – meaning that they’ve been declined for a loan, and they’re trying to understand why. Check your credit file regularly to spot any potential red flags and avoid future pain. 

Sourcing Help With What Affects Your Credit Score

If you are ready to “level up” and get financially fit, then it’s never too early to seek professional financial advice. Whether your next goal is to retire early, take a gap year or purchase a home, George Samios and the team at Madd Life are ready and waiting. 

With their entire business built on referrals, the team at Madd Loans have taken the mortgage broking industry by storm. Their overwhelmingly positive feedback has helped them to take out numerous industry awards, including the title of “Queensland’s Broker Of The Year” for four consecutive years. However, after working with a broad variety of clients in regards to their mortgage options, it made sense for the team at Madd to have the capacity to offer a full financial planning service.

If thinking about your financial future and tackling your credit score strikes a chord with you, then it might be time to speak to a professional. Whether you’re chasing mortgage solutions or a financial fairy godmother, the team at Madd work together as a collective to turn your goals into reality. 

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