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Understanding Credit Scores and Reports

Continue reading to learn more about your credit score and report.

09 March 2022Lloyd Smith 6 min read
Understanding Credit Scores and Reports

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The credit scores present in your credit reports determine your financial standing and your creditworthiness to lenders. It tells lenders how likely you are to pay back their loans on time.

By understanding credit scores and reports, you can better analyse where you stand and how likely you are to get approved for different credit products.

A credit score is a number present on your credit report which shows the creditworthiness of a person and their ability to pay back the extended credit on time.

The higher the credit score, the better candidate you are considered for extending a new line of credit. That means, with higher scores, you will get better offers from lenders like lowered rate of interest and even reward benefits.

The credit scores are calculated by credit bureau agencies and while the exact way these scores are calculated are kept under wraps, here are the main factors that can affect your credit scores:

  • Previous credit agreements like bank accounts, credit cards, personal loans, auto loans and utility contracts

  • Credit applications including all the ones that were accepted and rejected

  • Payment history including all the repayments that you have made and missed. It can also include accounts that are defaulted or in arrears

  • In case you have acted as a guarantor on behalf of someone else

  • All of your current credit limit and your credit utilisation ratio

  • Any kind of refinance of a property under your name

  • All kinds of accounts that have been opened or closed

A credit report is essentially a statement that includes all the information about your credit activity along with your credit situation to assess where you stand financially at the moment. This can include the status of your credit cards, loan payment history, and your active or inactive accounts.

Credit reporting companies that are also referred to as credit reporting bureaus effectively collect and store your financial information which is shared by creditors like banks, credit card companies, lenders, and other financial organisations.

After credit reporting bodies like Experian are done analysing your financial data, they generate credit reports which can then be used by lenders in the future to determine your creditworthiness. It can help lenders decide whether they can loan the money to you and what would be the best interest rate for it.

Other companies can use credit reports to provide you with pre-approved offers or insurance.

Credit reports include information about your current line of credit along with the inquiries that have been generated to view your credit report.

It can contain the following information:

Your personal information

  • Your legal name and any of your nicknames that have been used in the past for a credit account
  • Your birth date
  • Your current as well as former addresses
  • Your social security number
  • Your phone numbers, current, and previous

Your credit accounts

  • Your current as well as previous credit accounts which can include installments, revolving credit and installment
  • Your current credit limit
  • Your current account balance and payment history
  • Opening and closing dates for every account
  • The name of the creditor

The credit report will also include hard and soft inquiries for all the times a lender has checked your report or if you have checked your report yourself. It will include details about any recent bankruptcies, foreclosures, and defaults as well.

Credit scores are divided into different categories which makes it easier for the lenders to make a decision about how likely you are to repay off your loans without missing deadlines.

While the exact score ranges can differ according to the different credit bureaus, most credit score ranges commonly look like following:

Poor (300-549): People with a credit score like this are assumed to have low credit worthiness which can be due to many factors like their repayment history or missed payments. They are considered to be high risk candidates who are likely to default on their loans which in turn makes it very difficult for them to get approval for new credit applications.

Fair (550-649): With a score like this, you may still be considered a big risk by lenders, but it may be easier for you to get approved for some credit applications. Although you will most likely have to deal with high interest rates with little to no reward benefits.

Good (650-749): You are considered a good candidate who is at low risk of defaulting. You are also more likely to get approved for credit applications while you also getting some good reward deals

Very good (750-799): You are considered a low risk for lenders and you are likely to get approved for credit applications easily and get offered good reward benefits.

Excellent (800-900): With regular credit repayments, good credit history, and financial management, you can expect to be in the excellent credit range and receive lowered interest rates, best offers, and reward benefits for credit applications.

The average credit score in Australia is somewhere around 695.6. It's important to note that this number can vary according to the different credit bureau agencies. It can also vary according to your gender and age. But it's easy to consider 650-700 as an average credit score range.


One of the three major credit bureaus that produce credit reports detailing people’s borrowing habits, the Experian credit score range falls between 0 10 1000. The higher the score, the more your creditworthiness. You can review the borrower’s credit history of over a decade to analyse their past payment patterns.


Another major credit reporting bureau, Equifax produces credit reports that are similar to Experian with a comparatively similar format. It offers credit scores that fall in the range of 0-1000. The better credit score you have, the lower risk you are considered.


Like the other two, Illion also gathers credit information about individuals to generate in-depth credit reports. The credit range for Illion also falls between 0 to 1000 and a score above 500 is considered good.

You can use a platform like ClearScore that offers free credit reports in order to check your credit score and your report.

Here’s how you can get free credit reports with ClearScore in just four easy steps

1 - Sign up for a ClearScore account by providing your email address. 2 - Include additional information such as your legal name, date of birth, and residential address 3 - Provide the registered number for your driver's license, passport, or medicare card to verify your identity. 4 - Get your free credit report and check your credit score.

1 - Pay off any pending debt

It is necessary to first pay off your outstanding debts and settle your old accounts before proceeding to apply for new ones. You can check your credit report to review all of the open accounts and see if there are any unpaid balances or partially paid balances that need to be paid off right away.

Unpaid balances can have more interest piled up over them which can not only affect your credit score severely but it can also affect your finances.

2 - Build credit history by applying for short term loans

If you have been getting rejected for large amounts of loans due to your low credit score, you can build your credit history first and improve your credit score by applying for short term loans instead. You can repay the short loan on a regular basis which will help boost your score. You may get a high interest rate, but with a small loan, it wouldn’t accrue that much interest.

3 - Don’t miss out on payments

Your payment history is one of the biggest factors that will end up influencing your credit score. Keeping a good payment history means maintaining a good credit score. That is why you need to be regular with your bill payments and avoid late payments at all costs.

It's also a good idea to set up automatic payments for recurring bills like utilities or phone bills.

4 - Don’t apply for multiple credit products at the same time

Every time you apply for a new credit product, it creates a hard inquiry in your credit report. Multiple hard inquiries on your credit report can make lenders assume that you are out shopping for a new line of credit and you haven’t been successful in getting one. Moreover, too many hard inquiries in a short period of time can also impact your credit score.

Start by checking your credit report and reviewing your credit scores to see where you stand in terms of creditworthiness.

ClearScore makes it easy for you to get access to free credit reports in just a few clicks.

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Written by Lloyd Smith

General Manager AU

Lloyd spreads the word about how awesome ClearScore is.