Middle of the road isn’t so bad. A good credit score will usually mean you will get approved for most of the credit you apply for. But you need to be mindful of what actions could see your score heading south. Or more importantly, what you can do to increase your score and leverage a high score to your advantage.
Understanding the credit score ranges
Your credit score isn’t a static number. It changes over time depending on the information that is contained in your credit report.
There are five credit score bands that your score can fall into.
- Excellent: 800-1,000
- Very good: 700-799
- Good: 625-699
- Fair: 550-624
- Below Average: 0-549
A good score means you are less likely to experience an adverse event on your credit report in the next year.
A real-life example of someone with a good score
Kate is a mum of two who lives on the Gold Coast. She checked her credit score and knew she sat in the good (i.e. average) range. So she felt confident when applying for a new credit card that she would be approved.
But there is one thing that can trip you up, as Kate learned.
She was looking to do a balance transfer for a credit card and ended up applying for a few different cards at the one time, her idea was to choose the one that offered the best deal.
The issue with this is that her multiple applications for credit were all recorded on her credit report, and this made some financial institutions wary of lending to her.
In the end, she was able to get approved after discussing with a lender that those queries on her report were not approved cards, they were only applications. And she didn’t realise it would be a cause for concern.
Because Kate did not know this information was being recorded, it resulted in her getting the balance transfer, but not the best deal on the market.
If she'd been aware of this and had concentrated on building up her credit score even more, she would have had more negotiating power with lenders to access a better deal.
Factors that may be impacting your good score
In the case study above, it was too many queries on her credit report in a short space of time that caused the score.
But there are other circumstances which could see you fall into this credit score band.
These factors can cause your credit score to decline:
- A mistake has been made on your credit file which you will need to have fixed. Errors could range from a simple mistake such as a duplicate entry or incorrect details, or it could mean something more serious like your identity being stolen
- Defaulting on a credit account
- Submitting multiple credit applications in a short period of time
- Having excessive open credit accounts
- Having too much unsecured credit
- Not paying a bill and having it go to a debt collection agency
- Having a combined credit limit that is viewed as being too high
- Being declared bankrupt.
These factors can improve your credit score:
- Paying a default
- Bringing accounts up to date
- Negative data expiring and being removed from your report
- A good history of making payments on time.
How to improve your score so you can leverage it for added perks
In the past, only negative events such as defaults and bankruptcies were recorded on your credit score.
Now, positive credit reporting is rolling out, which means information such as your good repayment history will be seen on your credit report.
This is helpful for those with good scores, as lenders will be able to see you have a good history of paying on time.
Here are some practical ways you can move your score up even further, to access the perks that a high credit score can give you.
- Do your research first by researching credit cards at Credit Card Compare, to make sure you meet the eligibility criteria and don’t submit multiple credit card applications in a short time frame
- Make repayments on time. If you’re worried that you can’t make a payment, let your lender know. You may be able to modify your payment terms and you won’t have to worry about defaulting
- Pay your rent and bills on time (setting up a direct debit can help)
- Pay your mortgage and other loans on time
- Pay your credit card off in full each month
- Lower your credit card limits.
Track your credit score regularly to see the progress you are making.
With our free credit score tool, we can notify you each time your score changes.