Credit score tells lenders a lot about you, and it isn’t a static number, it’s constantly changing. For better or for worse your credit score is likely to rise and dip throughout your life, but what’s even the cause for a rise or dip in your credit history?
Here are a few reasons why your credit score might have fluctuated:
- You’ve applied for a new loan or credit card
The reason for this is because any new application you make for credit will directly affect your credit history. You don’t even need to be approved for the loan for it to affect your credit score in Australia as it will be listed on your credit report which will impact your credit. This is because any application is considered a “hard enquiry” and if you have too many of them in a short period of time it will decrease your score.
- You’ve changed the limit on your credit card
If you increase the limit on your credit card or apply for a personal loan top-up, it will negatively affect your credit history in most cases. On the flip side, if you decrease your credit limit it can have positive effects on your credit report. Either way, changing your credit card limit will show up on your credit report.
- You’ve closed a loan or credit card
Building on point two above, your credit score may improve if you close a loan or credit card. Only the credit card limits appear on your credit report, but not any of the current debts on your account.
- You’ve made late payments
Your monthly repayment information is listed on your credit report and has a direct effect on your credit score. If you make a late repayment then it will drop your credit score, simple as that. The opposite is also true. If you have a low score, then making your monthly repayments on time can have a positive impact on your credit history.
This includes making repayments for Buy Now Pay Later services, like AfterPay, on time as missing these will also negatively affect your score.
- A listing on your credit report expired
All the information on your credit report is only held for a certain amount of time, so when a listing is removed after some time, it can have a positive impact on your credit history.
- A credit provider has provided new information to a credit bureau
You might look at your credit score and wonder why it has changed randomly. The reason for this is because credit providers don’t always immediately report information to the credit reporting bureaus. The new information could include things like default information or credit enquiries which could both cause a drop in your credit score.
- New comprehensive data was added to your credit report
Since 1 July 2018, the Big Four banks have been mandated to report comprehensive data to credit bureaus. Under this new system, lenders are able to see more positive information about your financial history. This is intended to give a more accurate picture of your credit behaviour. The new information added that may affect your credit score includes:
- Your usual repayment amount
- Your repayment habits i.e., the frequency and whether you pay on time
- The type of credit you’ve held in the last two years
- The age of your credit
Lenders do actually like to see that you’ve held credit for a while but only if you have handled the credit responsibly over a long period. If they see you have done so, they are likely to reward you with a boost to your credit score.
- Moving addresses regularly
This is a weird one, but it could negatively affect your credit score. Lenders may see frequent address changes as a sign that you’re not in a particularly stable position. Lenders like stability, a lot, because if you are stable you’re more likely to pay off your loan. So, moving houses a lot might indicate to them that you’re not as reliable and therefore your credit score drops.
- Court judgements
Court judgements against can affect your credit history. The reason for this is similar to point nine, you are seen as a greater risk to the lender and so your credit score is dropped. These court judgements stay on your credit report for five years from the date of judgement.
If you wish to find out your credit score in order to take out a loan, contact us as It’s Simple Finance to see what we can do for you.