What is a credit score? Things you need to know

If you are a student, then the chances are that you somehow always find yourself strapped for cash, right? When you are living for the now and not thinking about what will happen tomorrow, it is pretty normal that you are always short on cash. It is also common for students to get post-paid mobile plans, cars on finance and sometimes even credit cards as a workaround for the shortage of cash. Most students don’t consider the fact that they might have to pay high-interest rates on any loans that they might have taken, and there can be surprise charges on post-paid mobile plans, especially if you are making international calls. Your financial dealings start to affect your credit score. Don’t know what a credit score is? Don’t worry, that’s what we are going to tell you all about in this article. Let’s begin.

What exactly is a credit score?

To understand it, you first need to know what credit health is. In the world of banking and finance, you, as a resident of Australia, have credit health, even though you are on a temporary visa. Your credit health is basically a standard for banking institutions to judge if you are eligible for loans and credit. Your credit health also plays a crucial part in determining the amount that you can potentially get from a bank as a loan. If you have good credit health, you are more likely to get a loan, and if you have bad credit health, then your chances of accruing a loan decrease accordingly.

One of the most important factors that define your credit health is your score. Your score will be a number out of 1000 that will be assigned to you based on your financial history by a credit reporting body. The higher your score, the better your credit report and your credit health will be. If you decide to apply for a loan to buy a house, a car or start a business, your credit score will play a crucial role in getting your loan approved. So, it is vital to start taking your score seriously.

How is your score calculated?

Your score is calculated based on several things. The three main things that affect your score are:

  • How much money did you borrow?
  • Amount of credit applications in your name.
  • Do you pay your instalments on time?

These three questions apply to your overall financial history, which means that any credit cards you might own right now or any loans you may have taken out previously are included. Depending on your bank, your case will be given to a credit reporting agency, and they will provide you with a credit score. If you get a near-perfect credit score, then you will be put in the excellent category. It will make it much easier for you to get credit or loans in the future. If you get an above-average credit score from the credit reporting agency, you will be put in the very good or good category. If your credit score is average, then you will be placed in the average category. And, If your credit score is bad, then you will be put in the below-average category. It is the five-point scale that is used by most banking institutions and credit reporting agencies.

The difference between credit score and credit report

It is easy to confuse the two, but there is a distinct difference between your credit report and your credit score. Your credit report is a detailed account of all your credit activity, whereas your credit score is, in essence, the short representation of your credit activity. Your credit report will have all your credit information from any banks, phone service providers, credit unions and lenders that you have interaction with. Your score will be a single numerical figure representing how good or bad your credit report is. It is the difference between the two. If you want to know your credit ranking, you need to consult your score, but if you want details on credit activity, you will have to consult your credit report.

What happens when your score is low?

So, now that you know everything that you need to know about your score. Let’s take a look at why you need to care about your score. And what better way is there to understand this than by looking at what happens when your score falls in the below-average category. Let’s take a look.

  • Higher interest rates – Having a bad credit score puts you on the risky borrower list. It essentially tells the banking institutions that you are likely to default on your credit card payments or loan payments. The banks will counter this by charging you more interest to discourage you from defaulting. The better your credit score, the less interest you will likely have to pay on credit cards and loans.
  • Getting a loan – If you have a bad score, your chances of getting a loan approved will decrease dramatically. Banks are much more comfortable lending money to people who have a proven financial record of not defaulting. On the other hand, a good score will make it easier for you to get loans approved.
  • Renting a house – If you are looking to rent an apartment or a house, then the chances are that your landlord will take a look at your credit score. Even though Australian law does not permit a real estate agent or a landlord to check your credit information without our permission, they can ask you to provide your credit report. If you have a bad credit score, it will make it harder for you to rent the apartment or house you want.

Other disadvantages of having a low score include paying security deposits on utilities, the possibility of being denied employment, trouble getting car loans and having to spend more on insurance.


All in all, you want to have a high credit score, and the only way of doing that is to get your finances in order as soon as you can, even if you are a student. Everything that you are doing now is going to reflect on your score in the future. Instead of working towards improving your score in the future, you should start working towards having a good score now. We hope that you find this article helpful. Best of luck!

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