How Is Credit Score Affected?

Jaystea on 13/03/2023 - 08:47

So I learned recently that using most of the credit limit on your credit card (otherwise known as a credit utilisation ratio) negatively affects your credit score.

I have both the citibank prestige and citibank premier - and I take full advantage of the citi payall feature which essentially puts my ratio at around 75%. I pay this off every month. I also have the AMEX plat charge (not strictly a credit card), and I put all my purchases towards it. And lastly, I have a relatively high mortgage (but not undergoing mortgage stress currently).

I've have never once missed any payments - and I've had multiple churn and burn credit cards for 5 years now (probably churned about 15-20 CC in that time). I always thought that paying off all your debts on time would positively affect your credit score - however, mine is quite poor at mid 400s.

Is this an accurate reflection of my credit score? And if so - is reducing my CUR the only way?

Financial

Comments

  • oscargamer on 13/03/2023 - 09:02
    +2

    If you had a higher number, would you be happier?

    What is it you can't get credit for with 400 that you could get with 900?

    You seem to be getting enough extras by churning cards, what more do you want?

    • Jaystea on 13/03/2023 - 09:20

      The first is curiosity as to how it works.

      The second is a lower score (supposedly) results in poorer refinancing options - which if it truly did, then this would be something I would hope to improve.

  • coffeeinmyveins on 13/03/2023 - 09:05

    What does your credit report say? Do you have any negative things on it? Did you get multiple credit agencies?

  • Maths Debater on 13/03/2023 - 09:14

    The more your credit file gets looked up (enquiries), the worse it is for your credit rating.

  • trustnoone on 13/03/2023 - 09:47
    +1

    A few things here that I was surprised on when I tried looking this up before (may not be correct)

    • Credit rating in Australia differ to places like the US, thats why something you might have read online may be wrong. Credit card is one I hear all the time, getting a credit card and paying it off to increase your rating. But in Aus having credit affects your score and usually getting a credit card means having a credit check which can also affect your score
    • Credit score isn't an "official" thing, like there isn't legal guidelines that set out exactly how it works. Each bank may have their own very specific scoring which determines whether they'll loan to you. Though many use the main ones (equifax and all that?) as a base.
    • Credit score can even be based on things you don't have a handle of, like where you currently live

    A lot of times I do think it is based on your CUR, plus the fact you may have got quite a few credit checks if you're churning. I'd probably get rid of the credit 3 months before applying for a loan to increase it? Then again usually a broker has a better idea about whether something is a "real" issue or not (if going for mortgage loan). Sometimes even if say a check on your card reduces your credit score, the bank itself won't care if you've never had issues paying it off.

    • Jaystea on 13/03/2023 - 18:17

      This is quite insightful. Thank you!

  • El-Rhi on 13/03/2023 - 09:53
    +1

    So I learned recently that using most of the credit limit on your credit card (otherwise known as a credit utilisation ratio) negatively affects your credit score.

    This is not true. In America, yes. In Australia, no

    • Jaystea on 13/03/2023 - 18:18

      That’s very helpful thanks!

  • payless69 on 13/03/2023 - 09:53

    Mine went down after handing back the Citi cards.
    Do I care?
    Why?

  • MortgageBrokerDylan on 13/03/2023 - 09:58

    Every time you apply for a credit card, it will lower your credit score. If you were applying to refinance, they'll look into as to why your credit score is low (credit enquiries, missed repayments or default) and will determine whether to refinance at their discretion. I also churn over credit cards for the points.

  • avoidfullprice on 13/03/2023 - 09:58

    Is this an accurate reflection of my credit score?

    Yes, it is what one of the three credit reporting agencies gave you. I don’t know which one because you didn’t mention where you got that score from. Read this if you are not familiar: https://www.ozbargain.com.au/comment/13458083/redir

    And if so - is reducing my CUR the only way?

    No. There are many factors which reduce your scores. Different for different agency scoring systems

  • HardQuiz on 13/03/2023 - 10:16

    Which credit agency rated you mid 400 ?

    What about the other 2 agencies?

    • Jaystea on 13/03/2023 - 18:15

      Credit simple. I haven’t used any others.

      • avoidfullprice on 13/03/2023 - 18:48
        +1

        That’s coming from illion agency. If credit simple doesnt give you a list of factors affecting that particular score, you can find them on their credit check websites

        https://www.creditcheck.illion.com.au

        From experience, even enquires bring the score down, let alone an approved credit card

  • djkelly69 on 13/03/2023 - 10:33
    +1

    credit utilisation ratio

    A quick google suggests this is a US thing.

    I think it is a lot more likely the 15-20 credit card applications in the last 5 years which has damaged your credit score.

  • TheMindsetTraveller on 13/03/2023 - 10:42

    If you can access credit as you please, then a credit score is just a useless number, agreed?

    I used to care about the number, but then after years of never being declined any credit request, I knew credit score (for me) was useless since it never affected the money/credit etc I wanted to borrow.

  • playbargain on 13/03/2023 - 10:46
    +2

    Using you credit up to the limit does not affect your score. Your score is partly based on the credit available so the full limit has already been taking into account whether you use it or not.

    I think your 15-20 credit applications in 5 years is what caused the score to be low.

    • Jaystea on 13/03/2023 - 18:16

      I thought so too - however I have not applied for any new ones for about 6 months and it has stayed quite stagnant (if anything it’s gone down)

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