Whether you’re a young Australian looking to build your credit history, or you’ve recently seen your credit score drop and are working to boost it, there’s several reasons you may be monitoring your credit score.
But how often should you check your credit score, and is it bad to check multiple times in one year? And can lenders really hurt your credit score by checking your credit history too frequently?
Let’s explore how often you may want to check your credit score and credit history.
Why check your credit score and credit history
Firstly, it’s important to note that your credit history and your credit score are two separate things, and how often experts recommend that you check them will differ.
Your credit history helps to determine your credit score. It is a report that tracks your financial responsibilities and any credit or debt repayments. This information is sourced from banks and loan lenders, credit card issuers, collection agencies, and utilities and telecommunication providers.
There are many events that may be recorded in your credit history, including your repayment history, money you borrow, credit applications, defaults, debt agreements or bankruptcy.
Your credit score is a number that helps to indicate your creditworthiness and how reliable you may be as a borrower, calculated based on your credit history. It is used by a range of organisations, such as loan and credit card issuers, to help weigh up the risks of whether to offer their products.
In Australia, there are two major credit reporting bureaus: Experian and Equifax. Experian and Equifax have their own credit scoring systems that are split into five tiers. As you can see, Experian and Equifax have two slightly different credit score scales. Equifax grades credit history between 0 and 1,200 and Experian grades it between 0 and 1,000.
|Credit score tiers||Experian||Equifax|
|Excellent||800 – 1000||833 – 1200|
|Very good||700 – 799||726 – 832|
|Good||625 – 699||622 – 725|
|Fair||550 – 624||510 – 621|
|Poor/Below average||0 – 549||0 – 509|
Source: Experian.com.au, Equifax.com.au.
This means that you will have more than one official credit score, but it should fall into the same credit score tier across both reporting bureaus. If you want a copy of your credit report, you’ll need to reach out to one, or both, of these reporting bureaus.
Hard credit inquiries and soft credit inquiries
Before you start deep diving into your credit history and credit score, keep in mind that there are two ways to look at an individual’s credit history, and one may hurt your chances of being approved for products in the future
There are two types of credit checks: hard credit checks and soft credit checks. The former typically occur by a bank or similar lender, such as if you apply for a home loan, personal loan, or credit card. The latter should occur when your credit history is not accessed by a bank or lender, such as if you need a copy of your own history and score.
Multiple hard credit checks in a similar time frame could hurt your credit score and see any applications you’ve made for credit products rejected. This typically occurs when you make multiple applications for one product at once. Lenders see this kind of behaviour as risky and lacking discipline, which may lead to your application being rejected. And a rejected credit application will hurt your credit score
This is why you want to be sure that if you’re looking into your credit score, or requesting a copy of your credit history, that a soft credit check only is occurring.
How often should you check your credit score?
Both your credit score and credit history are worth checking for several reasons, including:
- You want to apply for credit products and need to ensure your credit score is in an eligible range.
- You’ve been waiting for a default or other negative event to be removed from your report.
- Your score has changed significantly, and you need to check for incorrect or fraudulent behaviour.
You can check your credit scores as frequently as you’d like, with experts recommending looking into it once a year or as often as once a month. There are many ways you could view your credit scores from providers online. But ideally, you’ll want to use a platform that provides this service for free and, most importantly, offers a soft credit check only.
RateCity allows Australians to get their credit scores from both Experian and Equifax for free without affecting their credit score. A soft credit check is performed, so looking into your credit score will not show up in your credit report.
Further, it is typically recommended you get a free copy of your credit history from Experian and Equifax at least once a year. This is because these reporting bureaus are obligated to give you one free copy of your report each year. If you need to view it for any other reason, such as suspecting an error may have occurred, keep in mind that the bureau may charge you for this service.