What can and can’t affect your credit score?
finance-advice
1 minute read

What can and can’t affect your credit score?

What can and can’t affect your credit score?

by Sasha Karen | August 08, 2018 | 1 minute read

Making sure you have a good credit score so you can borrow is vital for any investor, but do you know what can and what can’t change it? A new study takes a look at some of the biggest misconceptions when it comes to understanding your credit score.

Credit score, good credit, bad credit
August 08, 2018

The study, performed by comparison website finder.com.au, revealed that 37 per cent out of a survey of 2,033 respondents believed not paying tax on time will negatively affect their credit score. This is a belief that Bessie Hassan, money expert at finder.com.au, said is incorrect.

“Lenders look at indicators such as loan repayments and credit card repayments, not if you’ve paid your taxes on time,” Ms Hassan said.

“If you’re looking to take out a loan with your partner, your partner’s credit score can also affect your borrowing capacity.

Over a quarter at 27 per cent also believed missing a credit card repayment from 10 years ago can influence your credit score, but this is also incorrect.

What can haunt you however are late payments on bills, defaults and infringements:

  • Late payments – a payment is considered late when it is overdue by 14 days and stays on your credit file for two years;
  • Defaults – a payment is considered defaulted when it is overdue by 60 days, more than $150 and stays on your credit file for five years; and
  • Infringement – a payment is considered an infringement when a lender tries and is unsuccessful in contacting you and stays on your credit file for seven years.

If you are unaware of what your credit score is based on or what it means to have a poor credit score, Ms Hassan warned that it would be difficult to get a loan in the future.

“Busting credit score myths and ensuring perception matches reality is critical especially for Aussies considering to take out a loan because lenders use your credit score to determine your borrowing capacity,” Ms Hassan said.

“It is near impossible to make changes to improve your score if you do not know what you need to change or worse yet, you do not know what your credit score is.

Depending on your credit score, knowing may either give you the peace of mind you need or the wake-up call you need,” she said.

The full results of the finder.com.au study are:

Belief

Perception that this belief affects score (as a percentage)

Does this actually affect your credit score?

Failing to meet loan repayments

80%

Yes

Bankruptcy

79%

Yes

Failing to pay bills on time

66%

Yes

Failing to pay the minimum monthly credit card balance

61%

Yes

Missing rent repayments

46%

Yes

Not paying tax on time

37%

No

Not having debt

31%

Yes

Going to jail

30%

Yes

Not paying credit card balance from 10 years ago

27%

No

Your credit card balance

24%

Yes

Failing to pay the full monthly credit card balance

23%

No

Your credit card limit

23%

Yes

Your salary

23%

No

Your bank account balance

16%

No

Partner’s credit score

15%

Yes (only if applying together)

Checking your credit score

12%

No

The neighbourhood you live in

8%

No

Level of education

5%

No

Other

2%

N/A

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