Credit scores

What does your credit score really mean?

Lenders look at your credit score or credit rating, which appears in your credit report, to work out if they should lend you money or give you credit. Here we explain how your credit score works and what you can do to improve it.

What is a credit score?

Your credit score is a number based on an analysis of your credit file, at a particular point in time, that helps a lender determine your credit worthiness. It is used by credit providers, such as banks and credit unions, to help them decide whether to lend you money, how much they will lend you and may sometimes influence what interest rate is offered to you.

How is your credit score calculated?

Credit reporting agencies collect your financial and personal information and document it on your credit report. This information is then used to calculate your credit score, which includes:

  • Your personal details (such as age and where you live)
  • The type of credit providers you have used (e.g. bank or utility company)
  • The amount of credit you have borrowed
  • The number of credit applications and enquiries you have made
  • Any unpaid or overdue loans or credit
  • Any debt agreements or personal insolvency agreements relating to bankruptcy

What does my credit rating mean?

Depending on the credit reporting agency used to calculate your score, it will be a number between zero and 1,200 or zero and 1,000.

The number is rated on a five-point scale (excellent, very good, good, average and below average). The position of your credit score on this scale helps lenders work out how risky it is for them to lend to you: 

  • Excellent - you are highly unlikely to have any adverse events harming your credit score in the next 12 months
  • Very good - you are unlikely to have an adverse event in the next 12 months
  • Good - you are less likely to experience an adverse event on your credit report in the next year
  • Average - you are likely to experience an adverse event in the next year
  • Below average - you are more likely to have an adverse event being listed on your credit report in the next year

How to find out your credit score for free

You can get a free credit score from a number of online providers. The results may vary depending on which credit reporting agency is used. The following websites offer a free credit rating:

You may need to check with more than one credit score provider to get a consistent and reliable measure of your credit rating.

Your credit score is dynamic, meaning it may change from month to month as your financial circumstances change.

Protecting your personal information

By obtaining your free credit score you may be agreeing to allow your personal information to be disclosed to third parties for marketing purposes. Ensure you read all terms and conditions and consider whether you want your personal information passed on for marketing purposes. You can opt out or unsubscribe where you do not want these details passed on.

 Checking your credit rating can protect you from fraud

You should check your credit rating and report to ensure your information is correct and that all the enquiries and listings on the report have been made by you. Criminals can steal your identity and take out credit in your name so checking the accuracy of your credit report is important. See credit reports for more information on how to check your credit history.

Case study: Jessica gets her credit rating

Credit score case study

Jessica wanted to be able to negotiate a better deal on her loans and credit card so she decided to find out her credit score. She found two providers offering a free credit rating online. She decided to compare the two and see how she rated with both.

The first website placed Jessica in the 'very good' category with a score of 726 out of 1000. The second website placed her in the 'good' category with a score of 699 out of 1200.

Jessica did some further research and found that each website used data from a different credit reporting agency to calculate her credit score. She requested a copy of her credit report from each of these agencies to see what the difference was.

It turned out not all her credit history was listed with the reporting agency the first website used so her score came out higher. The scoring system was also different across both sites.

Jessica decided to keep an eye on her credit rating in future to ensure it stayed high.

How to get a good credit score

Your credit score can increase or decrease over time depending on the information contained in your credit report. Your score can change even if your financial habits haven't. This could be due to a number of factors including:

  • Applying for a new loan or credit card
  • A listing on your credit report expiring
  • A change to your credit limit on an existing loan or credit account
  • New information from a creditor
  • Closing a loan or credit card account
  • Late repayments

Improving your credit rating starts with looking at your current financial situation and looking for ways to improve it. As your financial circumstances improve your credit rating will improve. Getting into a good credit position before you next apply for a loan can help increase the likelihood of you getting approved.

You can improve your credit score by:

  • lowering your credit card limits
  • consolidating multiple personal loans and/or credit cards
  • limiting your credit enquiries
  • paying your rent and bills on time
  • paying your mortgage and other loans on time
  • paying your credit card off in full each month

Credit scores help lenders decide if they should lend money to you. Knowing your credit score can help you to negotiate a better deal with your bank or find an alternative lender that will reward your good credit history.


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Last updated: 05 May 2017