How is your credit score calculated

Going back 10-15 years, I started to work my way out of ‘bad debt’.  But I didn’t have a handle on my repayments for anything really…  Let alone understanding how my credit score was calculated!

I had credit card statements overdue, struggling to make ends meet with utilities…  Even a mobile plans with large early termination fees outstanding as my contract was terminated and I was moved over to a prepaid service.

It was around this point, I decided I needed to sink or swim.  And while I was starting to formulate a plan to move forward (and hopefully not sink), I was told through word of mouth about getting a copy of my credit file…

What is a Credit File?

A Credit File or Credit Score, is what lenders (banks/credit unions/utility companies/landlords/etc) can use to make a decision about your ability to take out a loan and repay any outstanding balances.

It generally contains things like:

  • Active/open accounts you might have, including available credit 
  • Repayment history (ie on time / overdue)
  • What you have applied for in the past
  • Court judgements against you in the past 5 yrs

And based off these details, a Credit Score can be calculated.

And there are three primary organisations which manage credit files/scores within Australia:

So, back in the day, I requested a copy of my credit file. 

And this was in the ‘good ol’ days’, where you had to post in a form and request your file, so even though it was a lengthy process (compared to nowdays), a person could get a copy of their file, for free version under certain circumstances (ie declined credit application).

These days however, there are many sites which ‘plug in’ to these providers, and can give you free access to your credit file. 

Sites such as such as ClearScore, illion or GetCreditScore, now give you monthly snapshots and updates into your score and improvements/issues that might arise.  This is just a small handful of sites out there, but I have personally used these myself and not recommendations (ie I’m not playing favourites!).

Please be mindful though, given some of the personal details you have to provide to unlock access to your file, make sure you are using a reputable site! 

So how is a Credit Score calculated?

As mentioned above, since that first request to see what was on my Credit File, I have periodically checked my reports to make sure I am trending in the right direction – and nothing lurking hidden that I am not aware of (eg identity theft and someone applying for credit in my name).

But one thing always struck me, there was never really a concise breakdown of the score and what the ‘big items’ were to make improvements.

I knew I had debt, I knew I was overdue on accounts… But how does that all fit together in generating a score on my credit ‘worthiness’?

Up until recently, I had a loose idea on the weighting used.  Things like overdue payments – obviously red flag.  But applying for multiple credit accounts within a certain timeframe, is also quite heavily frowned upon.

Today, and this stemmed the idea for this post, I actually saw an infographic which was quiet easy to ‘digest’ (pardon the pun), but also clearly showed some of the bigger weightings against you, when applying for credit…

Credit to for that infographic…

One thing that stuck out for me, was the just how much past credit enquiries actually counted for/against you! 

When I was coming up with my plan all those years ago – I was inadvertently applying for multiple accounts because I was being declined…  And I was told back then, to avoid making so many applications…. Now I know why! 😀

Sink or Swim: Using your Credit File to start ‘swimming’

At the time, I used that first Credit File – and the harsh reality it showed me, to draw a line in the sand.

It was like a ‘stock take’ for me, and I used it as a pivot point.

Information is power – and now I had a little bit of power… Still debts, but I was taking the first step to get out from underneath.

I used the information to make sure I had all the outstanding/overdue accounts listed.  Then comparing with the accounts I knew of, I created a ledger / spreadsheet which defined ‘what was owning’ and to who.

From there, I formulated a plan to get out from underneath…  And I will touch on that plan in another post shortly.

One thing that came out of the report, was an large outstanding debt showing on the report, had actually been settled.  So I went through the corrections process to ensure it was rectified and removed from my credit file.

But for now, to wrap up, remember information is power! 😀  No matter how small of a step it may seem.

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