What Is A Credit Score And How Do You Build A Good One?

A credit score is a measure used by lenders to help them decide if they should lend money to you.  A credit score and a credit report are two different things, but are both related…

A credit report is a document that contains information about your conduct from all your previous credit history.  Loan applications, requests for credit, and late payments to providers are all recorded on this document.  A credit report used to only report on the negative things that a consumer would do, such as missing a payment to a utility provider, missing a repayment to a credit card provider and so forth and determine your risk of lending based on negative behaviors.  With the introduction of positive credit reporting, consumers now have both positive and negative credit habits recorded on their credit report.  This allows lenders to have a better understanding of their potential clients credit history, positive and negative, and could be beneficial for people who have the means to take on a loan but may have had a few marks on their report in the past, such as one or two missed payments.  When a lender can see positive behaviour it opens up your options for credit services.

Previously, using a phone bill as an example, if you missed one monthly payment you would have 1 x negative mark on your credit report and nothing else.  With the introduction of positive credit reporting you, and missing one payment your report would show 1 x missed payments, and 11 payments made on time.  Now lenders can better understand your credit risk and are looking at both sides of the coin (not just the negative) to decide whether you are a good fit to lend to.

A credit score is a number, connected to a complex algorithm that rises and falls based on your behaviour, attitude and conduct of credit-based services, and based on what is recorded in your credit report.  What does this mean?  Well… do you make sure you pay your utility bills on time, everytime?  Are you always applying for credit services?  Refinancing?  Requesting new credit cards?  These all have an effect, positive and negative on your credit score.  The higher score you have, the better conduct and attitude towards these services are.  The more you abuse the system, the lower your score will be.

It is so important to make sure that your behaviour is positive and consistent because if your number falls below a certain point you could be denied finance.  If you are approved for finance, you may receive a higher interest rate (especially for home loans) and may not get the best deal on the market.  If you want the best deal, the least possible interest rate, then your attitude and repayments to these services must be positive in conduct.

What can have a negative effect on your credit score?

  • Applying for a new loan or credit card.
  • A listing on your credit report expiring.
  • A change to your credit limit on an existing loan or credit account.
  • New information from a creditor.
  • Closing a loan or credit card account.
  • Late repayments.
  • Multiple requests for credit in very short periods of time (such as enquiring with multiple lenders at one time).
  • Using AfterPay, ZipPay, Latitude and other buy now-pay later services.

You can improve your credit score by:

  • Lowering your credit card limits (or closing credit cards altogether).
  • Freezing your credit card in ice and putting it in the freezer and not using it!
  • Consolidating multiple personal loans and/or credit cards.
  • Limiting your applications for credit.
  • Making your repayments on time, every single time!
  • Paying your rent and bills on time, every single time!
  • Paying your mortgage and other loans on time – always.
  • Paying your credit card off in full each month, every single time!
  • Not relying on buy now-pay later schemes.


If you are always relying on using credit cards and/or credit services, then why?  Is it because you spend more than you earn, or you don’t budget effectively?  Why not consider using a debit card and closing your credit card…?

Consider this, if you save $1000 and put it on a debit card that essentially acts as a “credit card” with a $1000 limit.  The difference?  You are spending YOUR money, not the lenders.  Depending on what you use it for may have a negative impact on your digital footprint, but when you use it to spend you could “repay” the debit card back up to its $1000 “limit,” and it’s all controlled by YOU.

If you want to stop relying on credit services and make sure you can pay your bills on time, speak to us today so we can help you.

Book your complimentary appointment with us today!

For more information or to arrange an appointment please contact us:

Andrew and Alyssa Mates on 0420 846 454

or via email at:

“An effective budget is knowing which numbers belong where; and what the values of these numbers are to make the magic in your life happen…”


ANDREW MATES is the director, money coach and operator of Adelaide Budgeting and has always had a keen interest in numbers and the philosophy of succeeding financially in a world full of consumerism.  Andrew is a valued member of the team and is passionate about education and empowerment around finance and providing people with the confidence to successfully manage their own finances.  Equipped with a Diploma in Finance and Mortgage Broking (but not a broker), Andrew and his team can work with you to create a budget plan and savings strategy that is second to none which will see you kicking goals and doing the things you want to do but never thought you could!

In between helping clients and working on strategies, Andrew also enjoys walking on the beach, playing with Lilly his Labrador and road trips with his wife Alyssa.