Credit score FAQ: What are the benefits of a clear score?
Your credit score is a bit like a heart rate for your finances. It offers lenders a quick and simple way to gauge your overall financial health. One of the key differences is that a credit score can never be too high!
A clear score doesn’t necessarily represent a perfect credit rating (which will generally range from 0 to either 1,000 or 1,200 in Australia depending on the credit bureau calculating it.) But chances are a clear score means you don’t have any significant black marks – such as defaulted payments or bankruptcies – on your record.
A clear score enables you to shop around for better deals at different lenders.
So what are the benefits of a clear score? And do you need a clear score for a mortgage and other forms of lending? We’re here to give you the low-down.
Benefit #1: You are more likely to get accepted for credit
Lenders view unblemished credit files far more favourably, which means you’re more likely to receive approvals for loans, credit cards and other forms of borrowing if you have a clear score. However, a blank history isn’t the same as a clear one. You still need credit activity on your file for providers to get an idea of how reliable you are at paying back debts.
You are more likely to receive approvals for mortgages and other lending with a clear score.
Benefit #2: Better interest rates on borrowing
You aren’t just more likely to receive approval for credit with a clear score; you’ll also generally have better access to lower interest rates. People with shaky credit histories are usually charged higher interest because they are riskier for the lender, which makes the overall cost of borrowing more expensive.
Benefit #3: A wider choice of lenders
A clear score enables you to shop around for better deals at different lenders. A low credit rating means less choice, and you may be forced to accept much higher interest rates and unfavourable terms and conditions. For example, you don’t need a clear score for a mortgage in Australia, but you’ll likely require a much higher deposit or have to use a specialist ‘bad credit’ lender if your rating is poor.
A clear score could help you get better deals on credit cards and other lending.
Benefit #4: More negotiating power
Another key benefit of having a clear score is the ability to negotiate with lenders for better deals on credit. You can therefore be more active with your money management and borrowing. Tell lenders about any attractive offers you’ve received elsewhere and ask if they’re willing to beat them. This can be especially lucrative for larger loans where lower interest rates can result in sizeable savings.
Still wondering why you should get a clear score in Australia? Just click here to find out your credit score and learn more about what you can do to improve your creditworthiness.