Using credit means that you are borrowing money that you would have to pay back within a specific period of time.  This means that this is a method that is used to determine the likelihood of you paying back the money you borrowed. 

This platform is also used when you apply for any type of credit such as phone or mobile contact, credit card, etc.  It is also a lender’s calculation of how risky your loan application is based on your employment, credit history and rating, stability, and income. 

Lenders also use past loan ratings to determine that following:

1. Credit limits on store cards and credit cards

2. The interest rate that the individual will pay when they borrow money.

3. To determine future credit behaviors and payment such as defaulting on repayments.

4. To determine the cost of insurance for the individual because a lot of insurers believe it’s likely that those with low credit values would make claims against insurance policies.

Banks use these ratings as well and they have their own formula for calculating.  In the Australian system, there are certain opportunities given to borrowers with low ratings that are not available in countries like the UK or the USA. 

It is possible to get approved with some lenders and be declined by others.   Also, lenders have different ways of viewing the risk of your application.  In order to avoid people finding out ways to work around it, the lenders do not publish their calculating method.

There are factors that can affect or cause low credit score.  Examples would include:

1. Employment status. You need to be in your job for at least 6-12 months and not be in probation.

2. Too many enquiries.  You are likely to fail the banks credit investigation if you applied for 2 or 3 mortgages in the last 12 months.

3. Bad credit history.  You will be declined if you have bankruptcies, defaults, or court judgment.

4. Inconsistencies.  Make sure that your address and employment history matches what is listed on your file.

5. Location.  There are some areas in Western Sydney that can cause your credit score to be reduced.  Such areas are known amongst lenders as having high level of defaults.

Did you know that credit rating is being done silently and people often don’t even realize it is happening?  In Australia, people would use consumer credit or credit that’s used for buying services and goods.  The bulk of a person’s credit rating is the effect of this.  Applying for a credit to make a purchase means that you are given permission for the lender or business to check your Credit History File.  Doing this will help you obtain information that’s outlined from BayCorp which is an Australian company that manages credit data.  You can contact BayCorp if you want to check your credit rating.

It is essential to understand how credit scoring works and what your credit score is in order to improve your credit rating.  Remember that your score is considered important financial information and is a representation of your credit report.  Having a high credit rating means that you are low risk and are more than likely be approved.  But having a low rating number means that lenders will view you as a threat.