What is Equifax One Score?

Australian credit reporting bureau Equifax has a scoring system called the Equifax One Score, which aims to provide greater consistency and reliability than other scoring systems.

The scoring system, which was launched in 2021, was developed to in response to:

• The introduction of Comprehensive Credit Reporting (CCR) for lenders;
• Australian consumers moving away from credit cards in favour of Buy Now Pay Later products, and;
• A global pandemic that left missing Repayment History Information (RHI) that could affect credit files for months or years to come.

While the overall concept and purpose of Equifax One Score is much the same as other credit scores, there are a number of key differences that make it unique.

What makes Equifax One Score different to other credit scores?

1. It factors in up to five years of credit enquiry and defaults trends

Equifax One Score was built using both short and longer-term RHI, plus up to five years of credit enquiry and defaults trends.

Because of this, lenders are able to assess borrowers’ creditworthiness based on a broad range of data, instead of being limited by data that may be missing or not useful.

2. It draws on alternative data sources such as Buy Now Pay Later (BNPL) services

In the past, individuals may not have had a credit history or credit score until they had taken out some kind of conventional personal finance product, like a credit card.

However, Equifax’s new scoring system draws on alternative data sources, including BNPL services like Afterpay, Zip, Klarna and many others.

For this reason, Equifax One Score can be useful in determining the creditworthiness of these credit applicants (referred to as ‘thin-file’ applicants) who have used BNPL services. A thin-file applicant is a consumer with little to no credit history – often young adults.

The issue thin-file applicants might normally face is that lenders may find it difficult to determine their credit behaviours and in turn either deem them too much of a risk and reject their application, or offer them a high interest rate that reflects the level of risk.

3. It can help provide consumers with greater accuracy and transparency around how decisions are made

According to Equifax, the new system provides consumers with personalised reason codes for credit application outcomes, allowing applicants to better understand why their credit application was accepted or denied.

This could give those who have had a loan application rejected a better opportunity to take actionable steps to improve their creditworthiness before reapplying for credit.

What can I do to ensure my credit score remains in good shape?

Working on your credit habits could put you in a better position to achieve, or maintain, a good credit score.

Some credit habits worth harnessing include:

• Regularly checking your credit score – RateCity’s credit score hub can provide you with fast access to your Equifax One Score for free. It’s worth getting into the habit of regularly checking your credit history because inaccuracies can occur, and you won’t be able to have them corrected if you don’t know they’re there.
• Limiting your usage of BNPL services – Because BNPL services split your repayments into smaller segments of the total cost of the purchase, it can sometimes seem like less of a commitment than it really is. The issue you could face is overcommitting to repayments, as even small amounts can quickly add up. If you do overcommit and don’t have the funds to make the repayments when they are due, you may not only be stung with late fees but also risk damaging your credit score. For this reason, it’s important to treat BNPL services much the same as any other credit product.
• Demonstrating consistently positive credit behaviour – Equifax One Score factors in up to five years of credit events. This means that negative events such as defaults can affect your credit score for years to come. It’s worth focusing on consistently paying down your debts in order to avoid getting into financial strain and risking missed payments. If you need help managing your debt, consider reaching out to a financial counsellor via the National Debt Helpline.