Did you know that the way the credit reporting system works in Australia has changed significantly in March 2014?

Since then, a new concept has been introduced to Australia, which has been at the core of the credit reporting system in many other countries (like the UK or the US) for many many years now.

It’s called: credit score.

Another major change that has occurred at the same time is what’s called comprehensive credit reporting.

The 2 minute video below gives the ‘gist’ of what “comprehensive credit reporting” actually means for consumers:

If you want to delve a bit deeper into the information and also make sure you are getting it from trustworthy & unbiased sources, I recommend you check the websites of the Australian Information Commissioner & the ASIC MoneySmart program.

You may think that all of this really does not concern you in any way as you don’t have any loans outstanding, don’t have a credit card and always pay for everything using cash or a debit card.

However, that would not be true!

Credit scores and the credit reporting system as a whole affect almost every single adult in Australia.

Do you have a postpaid phone plan account?

Do you have an internet connection or landline at home?

Do you use electricity or natural gas?

No doubt you’ll answer ‘yes’ to one or more of the questions above!

Well, guess what…

If you did, you have a credit file and a credit score.

The additional information which is now included in your credit file, and which is used to determine your credit score, has been collected since December 2012 but has only started being used in March 2014.

This information includes:

  • The date your credit payments were due
  • Whether or not you made the payments by the due date. It is important to note that no payment or even partial payment by the due date are both considered as missed payments.
  • The dates which you made any missed payments (but not the amounts that were missed)

The criteria for recording defaults on your credit file have also been changed and are as follows:

  • The default amount is $150 or more
  • You’re a ‘confirmed missing debtor’ or ‘clearout’ which means that your creditor can’t get in contact with you, or
  • 60 days or more have passed since the due date for payment  and the creditor has asked you to pay the debt either in person (for example by phone call) or in writing (by sending a written notice to your last known address).

Your credit file now also includes information on any commercial or business loans you have applied for, regardless of whether you were approved or not for these loans.

Bottom line, it is crucial that you always pay your bills on time including your utility and telco bills.

If you are the forgetful type, I suggest you set up direct debits for all these accounts to avoid any issues.

The good news is that if you are diligent with your bills, your good behaviour is ‘rewarded’ as your good repayment history is now also included in your credit file and has a positive impact on your credit score.

Every Australian can obtain a copy of their credit report for free once a year.

If you have been denied credit (remember that a utility account is considered a credit product) within the last 3 months, you can obtain another copy for free even if it hasn’t been a year since you last requested one.

Australia currently has three credit reporting agencies. They are all commercial for-profit operators who have been licensed by the government to maintain credit files on all of us.

Each company maintains its own independent records so you will have to get a credit report from each of these three companies.

They are:

They all have a turn around time of around 10 business days for the free service or you can opt for the paid service and get your credit report either immediately or within a day.

If you now live, or have ever lived in Tasmania, you might also have a credit file with the Tasmanian Collection Service and will need to obtain a credit file from them as well.

What is a credit score and how does it impact me?

One of the most significant changes introduced under the new mandatory “comprehensive credit reporting” regime, which kicked in on July 1, 2018,  is a personalised credit score for every adult in Australia.

This concept of credit scores existed overseas for quite some time now and in places like the US for example, it is so important and so pervasive that people ‘live and die’ by their credit score (including things like getting a job or being approved for a rental property).

This may sound a bit extreme but it really is the truth and Australia’s First Lady of Personal Finance thinks that it won’t be long before this is the reality facing us all here in Australia as well.

A credit score, in very simple terms, provides an assessment of how much of a potential risk you pose to credit providers by defaulting on your obligations if they were to enter into a credit contract with you.

How does a credit score rule your life?

The lower your credit score, the higher of a credit risk you are and as a result, the higher the chances lenders and other credit providers (such as telecommunication and utility companies) will not want to have anything to do with you or apply ‘sanctions’ before agreeing to take you on as a customer (e.g. require a security bond, require a higher upfront deposit or apply a higher interest rate) to compensate themselves for the higher risk they are taking upon themselves.

It is important to note that each credit reporting agency has its own scale and methodology for calculating a credit score.

This means that the actual numerical value of your credit score will be different with each of them.

Saying that however, the ‘gist’ of what that number means is the same as, in all cases, the aim of that number is to place you on a ‘creditworthiness scale’ for the benefit of finance providers (which includes utility companies and also Telcos who use it if you sign-up for any postpaid plan with them).

I really don’t want to confuse you any further by going into complicated finance jargon so instead suggest you watch the video below from a mortgage broker which explains quite well how the credit score is used in ‘real life’.

They start doing a bit of the ‘hard sell’ after the first minute so you are welcome to stop watching it after that 😉

If you want a detailed explanation of how the score is calculated and what factors are taken into account, I suggest you read this article from financial comparison site Finder which explains how Equifax, the biggest credit reporting company in Australia, is calculating their credit scores.

The process is quite similar for the other credit reporting companies as well.

Interesting findings from a recent research into Credit Scores in Australia

Comparison site finder.com.au have conducted a survey amongst more than 2000 Aussies to see what they know about the new credit score regime and how they are working with it.

Here is what they found:

Credit score sparks fear in a quarter of Aussies

  • The majority of Australians (67%) don’t expect a lender to reject a loan or credit card application based on their credit score.
  • However, 25% of Aussies fear they will get rejected for a loan or credit card because of their poor credit score.

Aussies have awesome credit: or at least they think they do!

  • 71% of Aussies have no concerns about their credit score – rating it as either very good (21%) or excellent (50%).
  • The survey of 2,033 Australians found:
    • 3% rank their individual credit score as ‘bad’;
    • A further 3% consider it ‘below average’; and
  • When asked how they would rate their credit score, 14% said ‘good’.
  • Slightly more women (10%) than men (7%) have no clue what their credit score is.

80% of Aussies haven’t made any attempts to improve their credit scores and 20% don’t even know how

  • The majority of Aussies (82%) have never attempted to improve their credit score, and 20% of Australians don’t even know how.
  • Of those that did try to improve their credit scores:
    • 56% decided to increase savings to pay down debt;
    • 27% consolidated their debt into a 0% balance transfer card; and
    • 25% took out a new credit card to establish a credit history.
  • Surprisingly, the demographic that was most likely to have done something about their credit score were Millennials, with 34% having made the move to improve their number. This is higher than Gen X at 17% and Baby Boomers, with only 10% having ever attempted to improve their credit scores.

How can I get my credit score?

First of all, you need to remember that each credit reporting agency has their own system for calculating credit scores and therefore, you will get a different number from each of them.

In order to get your credit score, you can:

  1. Order your credit report from each of these companies; and/or
  2. Get it through a dedicated online service.

The good news is that in both cases, it shouldn’t cost you a cent!

Dedicated online services for getting your credit score

If you want to get your credit score quickly & easily and either don’t want to wait for your full credit report to arrive in the mail or you’ve already used up your allowance of free credit reports for the year (one per person, per credit reporting company unless you have been denied credit within the last 3 months), you can use an online service for quickly retrieving your credit score directly from the credit reporting company.

Just to alleviate any concerns you may have: these services are almost always completely free (they make their money by other means as I’ll explain shortly) and using them won’t have any negative impact your credit score.

The credit scores from Equifax (formerly known as Veda) are the most widely used in Australia due to the fact that they have been operating in Australia the longest and therefore have the most comprehensive data on all of us (or so they claim).

This doesn’t mean however that their information is the most reliable or most up-to-date. They often make mistakes and then refuse to correct them, even when provided with the appropriate documentary proof.

Getting your Credit Score from Equifax (formerly known as Veda)

Finder.com.au

You can get your Veda score every six months from Independently-owned Comparison site finder.com.au.

You will need to sign-up for a free user account on their website and provide them with your full name, address and a form of identification (e.g. drivers license, Passport or Medicare card).

Once they are able to verify your identity electronically, they will display your Veda score in your account dashboard together with an explanation of what it means.

They will then continue to retrieve your Veda Score every six months automatically for as long as you maintain your user account with them.

Get Credit Score

Get Credit Score is a joint venture between peer-to-peer lender SocietyOne and Equifax.

The service itself works pretty much exactly the same as the service offered by Finder above.

Namely:

  1. You sign up for a free account on the website
  2. Your provide personal and identity details
  3. Once they verify your identity, they will show you your VedaScore
  4. The VedaScore will be updated every six months in your account dashboard.

Getting your Credit Score from Dun & Bradstreet

Just like Equifax, Dun & Bradstreet have been operating in Australia for quite some time now.

Their credit scores are widely used by Australian lenders but not as widely used as those from Equifax.

The best free service to obtain your Dun & Bradstreet credit score (and keep ongoing tabs on it) is Credit Simple which are owned by Dun & Bradstreet themselves (just like Get Credit Score are partially owned by Equifax).

In order to get your score, you will need to supply them with personal information such as full name, date of birth, current and previous addresses plus details of an ID document (Drivers License or Passport).

They will use this information to verify your identity and give you your Dun & Bradstreet credit score.

Unlike the other credit score retrieval services, Credit Simple can be a ‘one stop shop’ when it comes to the information Dun & Bradstreet have about you.

This is because they also give you access to your full credit report with Dun & Bradstreet through their dashboard. Not just your credit score.

Better yet, this access is ongoing and pretty much ‘real time’ so if Dun & Bradstreet record any new information in the credit file they hold on you, you’ll be able to see it straight away (and free of charge).

Basically, if you use Credit Simple, you no longer need to bother to request your credit file from Dun & Bradstreet separately.

Credit Simple also have this strange (or some would say ‘quirky’) thing where they compare your credit score anonymously against other people in your age group, your street and even your star sign.

Go figure! 🙂

Finally, if you check your score through Credit Simple and get a very low score (or even zero god forbid), they do a decent job at explaining why.

Getting your credit score from Experian

While Experian is a relative ‘newcomer’ to Australia, they are massive overseas and especially in the US where they are one of the biggest credit reporting companies (if not the biggest!).

Due to their relative short tenure down under, their credit scores are not as widely used at present as the Veda Scores or the scores supplied by Dun & Bradstreet.

However, it is still well worth your while keeping tabs on your personal credit score with them as well.

This is especially given the fact that unlike the Veda Scores which you can only access every six months, Experian allows you to access your personal credit score once a month.

The best free service to keep tabs on your credit score with Experian is Credit Savvy which are owned by mortgage brokers Aussie Home Loans, themselves a subsidiary of the Commonwealth bank.

Here is a short promotional video from them explaining how the service works:

You’ll need to give Credit Savvy a valid email address as well as the details of your Australian drivers license, Passport (Australian or overseas) or Medicare card in order for them to verify your identity electronically and give you your credit score.

One thing I really like about Credit Savvy is the fact that they allow you to monitor changes to your credit score, and to your credit report as a whole, free of charge directly from your account settings.

Credit Score Notifications

This is something credit reporting companies usually charge you for.

For example, Veda charges $80 a year for that.

As all these services are completely free to use for consumers , the obvious question arises:

How do these free credit score retrieval services make money?

Finder.com.au

Finder have a very extensive (and long!) privacy policy on their website which forms part of their terms of use.

The most relevant part for consumers when it comes to their Veda Score retrieval service is as follows:

When we will disclose your information?

As a general principle, we won’t disclose your personal information without your express permission unless:

  • we are required to do so by the law, to comply with our obligations or exercise our rights;
  • It’s necessary to lessen or prevent a serious and imminent threat to a person’s health, life or safety;
  • It’s necessary to lessen or prevent a threat to public health or public safety.

This was still a bit unclear to me so I reached out to them and asked directly if and how people’s personal information will be used and whether or not they will be marketed to as a result of using the credit score retrieval service.

The reply I received from their legal team was as follows:

In the absence of the consumer’s direction or express permission or unless required by law we will not release personal information to a third party.

That’s good enough for me 🙂

Get Credit Score

As I said above, Get Credit Score is a joint venture between SocietyOne & Equifax with each party owning 50% of the business.

It’s important that you understand that Get Credit Score is first and foremost, a marketing and lead generation arm for both of its respective owners.

The following is a direct quote from their FAQ:

GetCreditScore provides you with a free credit score in return for the right to store your personal details and make those personal details available to SocietyOne and Veda with your consent. Your details are never shared with any other third party without your consent.

GetCreditScore is a free service provided by Veda and SocietyOne. When you make a request for your credit score, SocietyOne and Veda may access your personal details to provide you with relevant offers. You may opt out of direct marketing from each entity at any time.

Basically, if you have a good credit score, you can expect to quickly start receiving marketing offers from both SocietyOne and Equifax.

On the face of it, this may not sound very appealing but keep in mind that if your credit score is very good, you could potentially qualify for better interest rates on personal & car loans through SocietyOne than what they make available to the general public.

However, if you are not in the market for a loan, you may not appreciate your data being used in this manner and if that’s the case, may prefer to stay away from Get Credit Score.

If that’s the case, you may prefer to use the service from Finder mentioned above instead as they do not pass your information to any 3rd parties for marketing purposes.

This is what I personally did myself 🙂

Credit Simple

Credit Simple answer this question directly in their FAQs:

We work with banks, energy companies, insurance providers and telcos to get better deals for Australians.

We present offers based on your credit profile.

Each time someone signs up to a deal offered through this website, we get a small payment from the supplier. We also sometimes receive a fee to show an offer on our site.

We want to be transparent about how we make money, so you know how Credit Simple works.

They also have this to say about whether the commissions they receive will impact the offers they show you:

We’re not afraid to tell the banks, telcos or energy companies to do better and we work with them to get better deals for Australians.

We then match offers to our customers based on their credit scores and their credit profile.

While we don’t show or review all offers available in Australia, we believe all Aussies deserve better deals and we’ve designed Credit Simple to give you access to better financial deals and make more informed decisions.

We can’t guarantee that you will be approved for any advertised offer, and advertisers may take into account more than your credit score when assessing applications you make

My main concern with all these type of service is whether they pass private information they collect to any third parties and the statements above don’t really answer that.

Therefore I dug deeper into their privacy policy which had this to say in section 5 – Disclosure of your personal information:

You consent to your personal information being disclosed in connection with any Purpose to any of the following:

D&B – we only disclose your personal information to D&B if you request your credit score or other Credit Information using the Credit Simple Website. The personal information that we disclose to D&B is limited to your identity verification information, contact details and any other information that you expressly authorise us to disclose to D&B as part of the request application process, or when you update your details with us;

Credit providers – we only disclose your personal information to credit providers if you have asked us to obtain an indicative quote and/or approval for a loan on your behalf – the information that we provide to credit providers will be limited to your identity verification information and email address, together with any other information that you expressly authorise us to disclose.

The collection, use, storage and disclosure of that information by the relevant credit provider will be subject to the credit providers privacy policy.

We do not control and are not responsible for any credit provider’s privacy policy but note that credit providers will undertake their own assessment of your creditworthiness which is likely to involve the disclosure of your personal information to D&B;

Our service providers – such as Green ID and other identity verification service providers, IT contractors, call centres, stationery printing houses, mail houses, storage facilities, lawyers, accountants and auditors, who will need to have access to your personal information to provide those services;

Organisations that provide products or services used or marketed by us, including intermediaries (such as financial advisers), trustee companies, financial institutions and securitisers;

people considering acquiring an interest in our business or assets;
Our employees, contractors or service providers, to the extent reasonably necessary to fulfil our obligations to you;

Our related bodies corporate, to the extent reasonably necessary for the purposes set out above;

Any law enforcement, legal, government or regulatory agency, where such disclosure is required or authorised by law;

Other individuals or companies authorised by you; and
for any other purpose permitted by law.

Some of the entities we disclose to may be located overseas, or may disclose your personal information to parties in foreign countries who are not subject to the Privacy Act.

By providing your personal information to us you consent to this disclosure.

This is pretty clear cut.

Basically, they won’t pass your information to any lenders or finance providers unless you specifically request and authorise them to do so.

However, if Dun & Bradstreet ever decide to sell this arm of their business to someone else, the privacy of your personal information cannot be guaranteed.

Also, once your personal information leaves Australia, it is anyone’s guess as to how secure (or not!) it may be.

Credit Savvy

Their FAQ says the following:

If it’s free, how do you make money?
Rest assured, it’s completely, utterly free. We don’t even ask you for your credit card details.

Our money comes from banks and other financial institutions. For example, they may pay us to show you their products. This enables us to give you your credit score and credit file information for free.

Will you share my personal information with a broker, a lender, or anyone else?
No. We respect your privacy and we value your trust.

We won’t ever share your personal information and you will not be contacted by lenders or brokers as a result of using this service unless you specifically request so.

As you can imagine, and for pretty obvious reasons, Credit Savvy ticks the ‘privacy box’ for me and I feel comfortable enough to use them myself.

Using the services mentioned in this post, you’ll be able to both find out and monitor your personal credit score without it impacting your credit score or costing you anything.

Just keep in mind that your credit score and credit report are two DIFFERENT things.

None of the credit score retrieval services mentioned in this post will get you your full credit report.

In order to obtain your full credit report, you need to approach each of the credit reporting companies directly.

For questions or comments, the comment box below awaits. Don’t be shy! 🙂

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