Ever wondered why it is important to track your credit rating? Every Australian has a three-digit score, a credit rating that is calculated by credit reporting bodies (CRBs). This reveals data about your financial history gathered from financial institutions and banks from all over the country.
Your credit rating is the first thing a lender will check and determine by it if he’s going to give you a loan and how much you will be allowed to borrow.
Making regular payments will boost your credit rating, while skipping payments, not being able to pay your instalments on time or an overdrawn bank account adds up to a bad credit score.
Why is it important to track your credit rating? Because it reveals if you are a reliable borrower or not. Even though some people think that by not having any loans means they have a good credit score, the reality is the other way around
If a lender doesn’t have any history to check on, then he can’t assess the situation or have any indication that you’ll pay back the loan.
Let’s see why it is important to track your credit rating and how to do it!
- In case you want to take on a loan, your credit rating will reveal your possibilities or conditions you’re going to have to meet to obtain it.
- It’s your right as a consumer to know your credit rating, so once a year, you will get a report that shows your score. You can also ask for a report immediately after you’ve been refused by a financial institution after applying for a loan.
- Find out your credit score by asking one of the national CRBs for a report (Experian, Dun&Bradstreet or Veda). If you’ve already gotten a report this year, you might have to pay a fee to get another one.
- A mortgage application relies on your credit score, so before applying for one, check your credit score and find out what are your chances for a loan.
- Errors or identity theft can happen, so by checking your credit score, you’ll be able to look for irregularities that might affect your financial situation and pose problems.
- Your credit score can affect your plans for taking on a loan for your dream house. Knowing what are the chances and the amount of the loan you can take will make the search for a house more realistic.
Why is it important to track your credit rating if you already know it has a negative score?
An unknown but poor credit rating isn’t a reason to be oblivious to it and ignore it all together.
First, a credit rating shows how you’re managing your finances and your financial history. You can discover what sets you back and thus making it the starting point for finding out how to improve it.
Secondly, chances are you’re going to invest sooner or later into a house. If you’re ignoring the credit rating situation, it’s possible that all the time you’ll spend searching for your dream home will be in vain. Not having a loan approved will only set you up for disappointment.
I hope that this article offered some precise answers to the question “why is it important to track your credit rating?”