Your credit score gives credit provides a gauge as to where you sit in relation to other potential borrowers. It tells them whether it’s a good idea to lend money to you, or not. When your score is high, watch the lenders line up for your business. When the score is low, lenders will close their doors in your face time and time again.

When your score is high (+833) you are in the top 20% of the credit-active population. In this group, as long as everything else is in order and your income will cover the finance you are seeking, you will not have a problem obtaining the finance you wish to.

When your credit score is low (-510) you are in the bottom 40% of the credit-active population. In this group, even if your income stacks up and your affordability for a loan is sure, it is unlikely you’ll be able to get a loan. If you are, it will not be at an industry standard rate with an industry standard application fee. You may still be able to get finance, but it will cost you with higher than average interest rates and application fees.

When you have a lower credit score it signifies to credit companies that you do not understand how to properly manage your finances in the way they want you to, or you have not had recent or long-term experience in managing a line of credit. Credit providers are fearful of people with lower scores because they typically do not pay their debts on time. This may be because they are new to or have never been given credit before. Or they are new to Australia and do not understand the laws around credit repayment. Or they are in their late teens or early 20’s and have not had much experience with money management. Or they shop around for finance from all different types of companies and do not appear to be brand loyal.

Credit companies are notoriously concerned that they do not know the whole picture. If you’ve been shopping around for the best deal, or have been to lenders that would not be considered ‘top-tier’, this will be reflected in your credit score. And this action will be flagged by the company you’re applying for finance with and may be an automatic “no”, purely based on that. People apply for finance when they don’t really need finance, so credit companies also want to know who is worth investing their time and resources in.

Treat your credit score like it is very significant. It is not the only thing that is considered when you apply for credit, but it is significant and needs your attention. Treat every interaction you have with a credit company as significant and do not flippantly apply for finance or shop around with no intention of obtaining finance. It could cost you for up to 5 years as that is how long negative shopping patterns stay on your credit file.

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