Not sure what a credit score is all about? In a nutshell, your credit score is a number that sums up your credit worthiness. It’s determined by a number of factors including how many applications you make for credit (aim to keep these to a minimum), how many credit accounts you have and whether you’ve defaulted or made late payments on bills and credit.

Your credit score matters because banks, credit card companies, utilities and even telcos can all use it to determine whether to extend credit to you.

Just as importantly, your credit score can shape the interest rate you pay on loans, so maintaining a good score can be a way of securing a better deal.

How do I find out my credit score?

That’s easy. Head to Credit Savvy, type in a few details, and your personal credit score is displayed on screen in just a few minutes. It’s free, it’s confidential and taking a look won’t impact the score you receive.

What if your score is low?

Okay, back to Grace.

Like many Australians, Grace managed her money carefully, and had accumulated savings of $30,000. So she was amazed when she was rejected for a credit card with a limit of just $1,000.

Time for Grace to do some scoping around.

She explains: “I had to understand why my score was low, so I called a credit repair place, ran searches of myself with credit reference agencies, and got a well-rounded view of my position.” It turned out, Grace’s low credit score was the result of an outstanding council fee of $100. At least, that was part of the problem.

“I discovered there was a mark on my name for a fee of $100 that was never paid to a council,” says Grace. “But there was no follow up on this by the council as I had moved homes many times.”

In the meantime however, Grace had applied for other forms of credit. “I didn’t know that every time you apply for something and get declined, you lose points off your credit rating,” notes Grace. “I had applied for quite a few things that year including refinancing my phone bill with a different provider, and was declined because of the mark on my name.

“But every time I was declined I was losing points. This was quite infuriating because I was just applying online and losing points off my score without even understanding why. It didn’t matter which bank or phone company I spoke to, no one explained this to me. They would just make me apply again with smaller amounts, and I would be declined each time – losing more marks with every application.”

Check your credit score regularly

Discovering your credit score is low is no one’s idea of fun. But on the plus side, Grace says she has learned some valuable lessons along the way.

“If you have borrowed money from banks, do an annual check on your credit score to make sure you’re on track,” says Grace.

In fact, it can pay to look at your credit score more frequently as it can change rapidly, and a low score isn’t always the result of an outstanding bill. It could reflect an error on your file, or worst case scenario, your identity may have been stolen.

If you’re thinking of taking out a home loan it’s important to check out your score 3-6 months beforehand to be sure you’re good to go when you’re ready to make a loan application.

In the meantime, keep your credit score in great shape with a few simple steps:

• Think carefully about frequently changing credit cards • Notify all your credit providers if you change address • Research and compare products thoroughly and only apply for the product you feel is right for you. • Ensure bills get paid on time by setting up direct debits.

Talk to your Aussie Broker for more tips on keeping your credit score healthy – and to find the home loan that’s right for your needs.

This article was originally published in 2018.