The major credit reporting bureaus in Australia have different scales for their credit scores. Your credit score will differ depending on the entity providing the credit file, as each reporting bureau uses different metrics and different rating categories to inform the score.
What is a credit score and how is it calculated?
A credit score is a number that determines your “creditworthiness” and likelihood to meet your repayments on time for bills and other credit products. You will likely have credit scores with each of the major Australian bureaus; Experian, Equifax and illion. Your credit scores are calculated by assessing your personal credit file, and history of making repayments.
The main factors that determine how your credit score is calculated include:
- Credit products you have applied for, including any hard credit checks on your file.
- Any late payments on bills.
- Credit limits and outstanding loan amounts, if applicable.
- Adverse events, such as late payments, defaults, or bankruptcy.
Each bureau independently collects consumer data, provided by banks, lenders and service providers, that populates your credit file and assists in determining your credit score. Unfortunately, the exact methods and algorithms for how the major bureaus assess your credit scores are kept out of public knowledge and differ for each bureau.
What we do know is that your personal credit scores will be different depending on which bureau you’re asking.
Why is my credit score different on different sites in Australia?
There are a few key reasons that your credit score may differ depending on the credit bureau or third-party you’re accessing this information from.
- Different assessment methods
Most significantly, each credit reporting bureau in Australia uses its own internal metrics and algorithms to assess how your payment behaviour (both good and bad) determines what your credit score will be. Little is known about how significant actions such as paying off a credit card balance, or missing a car loan repayment, will be with one bureau versus another. This adverse payment behaviour may be assessed more harshly at one bureau, whereas the positive payment behaviour may carry more weight at another.
You will have different scores with each of the bureaus, but you’re likely to fall into the same tier of credit risk across all bureaus. The different credit score tiers of risk are:
- Very good
- Below average/low
2. Different assessment time frames
Another factor to consider is that the credit bureaus will typically assess your payment behaviour at different timepoints over the year. So, if your score has increased with one bureau and not with another, it may be because that bureau has not updated your credit file with this new information.
Every 30-45 days, banks and service providers may report to the major bureaus about the payment behaviour of their customers. A debt collector may report more frequently than a bank to a credit bureau, depending on the severity of the financial situation you are in. Australians can request a free copy of their credit history from the bureaus once every three months.
3. Different sites partner with different bureaus
If you’re using different third-party platforms to quickly view your credit score, such as websites or credit score apps, you may find that your credit score also differs between them. This is because these third-party platforms may be affiliated with only one particular bureau. If you check your credit score with Website A, which is affiliated with Equifax, and then check your credit score with Website B, which is affiliated with Experian, you may find that you get a different credit score for each different site due to their differing ratings systems.
4. You may have a short credit history
It is possible to have no credit history or credit scores, or a credit score with one bureau and no credit score with another. If you are a young Australian and have never had your own phone plan, or had your name on an energy bill, it’s unlikely you will have a credit score.
However, if you’re asking yourself ‘why is my credit score different on sites that offer different products?’, it may be because the feed of information through to the reporting bodies is not constant. Just one credit bureau could have registered your short credit history, with the remaining two still waiting to catch up.
This can be an issue if you are trying to improve your credit history and credit score to gain approval for credit products, such as a car loan or a home loan. In this instance, it may be worthwhile being patient and displaying 12-24 months of positive payment behaviour before applying for any new credit products.
Why do credit scores matter?
Your credit score is crucial in the serviceability testing and eligibility criteria of banks, lenders and other service providers in Australia. For example, if you need someone to lend you money to pay for a wedding, or to buy property, the lender needs some assurance that you are able to meet your repayments on time and not default on the loan. This is where a credit score comes in handy, as it is a measurement of how likely you are to make timely repayments and service a line of credit responsibly, as determined by your past payment behaviour.
Having an ‘excellent’ credit score (one that sits in the highest credit score scale) indicates to providers that you are very likely to make your repayments on time and pay off any debts. This would make you more likely to gain approval for any credit products, including more competitive rates or lower fees if you have a higher credit score.
Conversely, a ‘low’ credit score may indicate you have a history of late payments, defaults and other adverse payment behaviour. This is a warning to credit and service providers to not approve you for credit applications until you have improved your financial situation.
Does cancelling a credit card affect credit rating in Australia?
If you’re seeking to boost your credit score, you may be surprised to learn that closing your credit card in Australia could have a negative effect. If you struggle with healthy financial habits and nevertheless wish to cancel your credit card, consider following the best financial advice for your situation.
That being said, closing a credit card may impact how a credit bureau assesses your credit score, as you will be reducing the information available. It may be worthwhile using the credit card responsibly instead, and paying off your balance in full each statement period.
Does having different credit scores on different sites really matter?
Ultimately, having different credit scores on different sites in Australia is not that important as long as they all sit in the same credit score scale. Each bureau assigns your credit score into a category of risk:
It may be more relevant to look at where your credit score sits in these tiers of risk rather than to look at the credit score itself. Having a credit score that sits in the category of ‘very good’ across all major bureaus means that for any bank, lender or service provider you may apply to, your credit score shows that you are in a healthy financial position to be approved for a line of credit or service.
If you have a ‘low’ credit score with one bureau, and an ‘excellent’ credit score with another, it may be worthwhile investigating this to ensure that:
- You are aware of any adverse events that may have occurred, such as late payments.
- Errors have not been recorded on your credit file (not an uncommon occurrence).
- You have not been a victim of identity theft, with criminals using your personal information to apply for credit products in your name.
Simply request a copy of your credit history with the bureaus and go through it with a fine-tooth comb for any errors or suspicious activity. This could be a very new adverse event that has occurred, and every credit bureau may not have recorded it in your credit history yet.
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