Five things you didn't know impacted your credit score

Applying for credit:

Whenever you apply for credit—whether it’s from a bank (even if you’re an existing customer), a personal loan company, or for a credit card—a new credit check is made. A credit check is when an organisation reviews your financial history before approving your loan request or accepting you as a customer.

The good news is that a new law came into effect on 1 October 2019, which means lenders such as Harmoney can now make a quotation enquiry on your credit file in the first instance. This allows us to give you a quote on your loan terms before you complete a loan application. This quotation enquiry will be recorded in your credit file, but it cannot be used by a credit bureau to assess your credit score. A credit check will only be reflected in your score if you choose to progress from a quote to a loan.

Frequent card transfers:

Transferring credit card debt to zero-interest cards can be an appealing and effective way to repay outstanding amounts without having to pay high interest rates. However, if you need to apply for a new card to transfer the balance, this will impact your credit score. It can also affect your score if you require a limit increase on a card to accommodate the transfer.

The average age of your accounts:

This refers to the length of your credit history. The longer you've had your accounts, the more a pattern of your financial behaviour can be identified by creditors or lenders, which can be an indicator of risk. If you have a lot of newly established accounts, it is harder to determine how well you manage your finances.

Frequent change of utility providers:

In some situations, frequently switching between power, phone, or internet providers can raise credit red flags. While you may just be chasing a better deal, each time you sign up with a new provider a credit check is requested. Each request is added to your credit file and can hurt your credit score. That’s not to say you shouldn’t switch for a better deal—just think about how often. You could also talk to your current provider to see if they can match a competitor’s offer.

Not paying your bills on time:

OK, this one’s a little more obvious—but we’re not just talking about big bills like a loan, mortgage, rent, or car payment. It’s also about staying on top of smaller bills. Any bill that is overdue by two months for an amount of $150 or more can impact your credit score. It’s good practice to know exactly what’s going out, when it's due, and to ensure it's paid on time—or cancel anything you’re paying for but not using. Which brings us to…

The good news!

Comprehensive Credit Reporting means your credit score is no longer just impacted by the bad stuff. Everything you do well—debts paid off, bills paid on time—also counts toward your score. A few simple changes and some financial tidying up may help improve your credit score quite quickly.

We write these articles for you—our Harmoney borrowers—in the hope they are helpful tools for different aspects of life. The information is designed to be a general guide only. As you read, please consider how—or if—it applies to your circumstances, and whether you should seek further advice from an expert in that particular field.