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How Important is your Credit Score?

How Important is your Credit Score?

A recent survey of nearly 1,600 people revealed almost all respondents believed knowing their credit score was critical to improving their finances.

The survey also found the majority of people have no clue what their score is. A credit score is a number that depicts a consumer’s creditworthiness. The higher the score, the better a borrower looks to potential lenders.

Digital lender SocietyOne offers personal loans and was acquired by non-bank lender MoneyMe in December last year – the same time the survey was conducted.

The survey concluded 97.7% of respondents thought it was important for Australians to know their credit score; 93.3% said they found it useful to have finally learnt their score through SocietyOne and 73.5% wished to improve their credit score and overall finances.

However, only 32.8% of respondents knew their credit score before being encouraged to check it and 60.9% were surprised by the result once they received their score, which highlighted a major gap between knowledge and action.

“A credit score is an excellent indicator of financial health and many Australians appear to understand its importance,” said MoneyMe chief operations officer Jonathan Chan (pictured).

“However, half of all Australians still have not applied for their score to know where they stand when applying for credit of a loan and finding out your score is only the first step.”

Chan said understanding what actions and habits impacted a credit score could help to guide what would be needed to improve it.

“Credit scores are dynamic and can change with certain types of financial behaviour, so we also encourage Australians to regularly check their credit report to proactively manage your financial help,” he said.

“The fact that so many of our customers have improved their credit score since signing up with us shows that knowledge about and engagement with your score and overall finances can help you to improve your finances overall, whether that be by getting a better deal on a loan or creating good financial habits.”

The SocietyOne credit score draws on data from the Experian credit bureau, where SocietyOne’s customers could benefit from deeper insights and exclusive content designed to help educate customers.

Experian general manager of credit services Tristian Taylor said while improving credit scores take time and careful management, there were ways people could proactively manage their financial wellbeing.

 “Don’t forget that a credit score is simply a view of your financial health and the way you work with credit,” Taylor said.

“Keeping on top of your repayments and choosing the right financial products for your situation are important factors in maintaining a strong credit score.”

Key factors that could help to influence a credit score include –

  • The type of lender you have applied to
  • How well you’ve kept up with your repayments
  • The credit limit of each of your credit products
  • The type of product you have applied for
  • The number of credit applications you make
  • Any negative events, such as defaults, judgements, or bankruptcies

Source: BrokerNews

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