Published on 21 March 2016

What Is Your Credit Score And Why You Should Know

As you consider the possibility of applying for a loan or for credit, you are inevitably going to want to know about your credit score. This is fair enough, since your credit score is going to play a keen role in the types of loans or credit that are made available to you.

In the end, it is important to understand why it is so important to know your credit score.

Knowing Your Credit Score

Living in Australia, you have access to your credit score or rating. Furthermore, you also have access to your credit file. At the same time, it is important to keep in mind that potential lenders also have access to these facts and materials, and review such information on application of new loans.

Credit files are created when you apply for things like credit cards, loans, or mobile phone plans. A credit file, which is also known as a credit report, can prove to be a highly valuable element to your desire to obtain credit or a loan. Overdue debts, any default, and credit applications are just a few of the things that will make up your credit report/file.

You can expect a lender or provider to make an enquiry to a credit bureau. One example of such a bureau is Veda, which will maintain a record of an enquiry such as this. Once they have your credit file/report on hand, they will be able to determine if you are the type of person to whom they can extend a loan or line of credit. Their own criteria will be utilized, in terms of determining whether or not you qualify for a loan. A score might be used during your application assessment.

Understanding your income and all of your expenses will help you to understand how much you can borrow. You may want to strongly consider paying down your existing debt, prior to applying for a loan or line of credit. This can be a particularly useful avenue for those who are concerned that their current debt might keep them from securing the financing they require.

If you are concerned about how your financial information is being handled, keep in mind that your documents are protected under the Privacy Act 1988. Credit reporting bodies and credit providers are required to adhere to the regulations under this act to the absolute letter.

Understanding your credit score is vital. This is even true for those who have no desire to go through the process of securing a loan.

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