What is a credit score?

A credit score is used to help lenders decide whether or not to loan money or provide credit and on what basis. A score summarises information on a credit application or credit report into a single number. There are many different types of scores including application scores and bureau scores.

VedaScore is Veda's bureau score and is a rank ordering tool. It uses only information on credit files held by Veda to predict the likelihood that an adverse event will be recorded on your credit file in the next 12 months. The score alone is not a determinant of whether or not a credit provider will give you credit. Credit providers have their own lending criteria and the score is just one piece of information they take into consideration when assessing your application. VedaScores are calculated based on information in your credit file, such as:

  • Whether you have an overdue debts on your credit file
  • The number of enquiries you’ve made to lenders about credit, over time
  • The types of lender’s you’ve applied to
  • The type of credit you’ve applied for
  • The dollar amount you are applying for
  • Public data including court judgements or court writs
  • Defaults including how many, whether they are paid and how recent they are.

Each credit provider applies their own criteria and policies when making decisions on giving credit, which is why some lenders may approve your application while others don’t.

Understanding your VedaScore

If you sign up for a package that includes your VedaScore, you will receive a number as well as a guide to understanding what this number means.Put simply, the higher the number the better the score. VedaScores range from 0 to 1200 and the higher the score the more likely you are to be accepted for credit, if there are no other factors that could result in credit being declined, e.g. loan amount is too high for your level of income, or you don't have employment etc. If you have a low VedaScore it may be more difficult to gain access to credit or may mean you are approved by a lender that charges a much higher interest rate. If you have a VedaScore of 0, statistically, you have an 80% or greater chance of defaulting in the next 12 months. Paying off loans and paying bills on time as well as managing the amount of credit you apply for you may help to improve your VedaScore. See How to improve your credit score.

What do the VedaScore Risk Grades mean?

Below average (Bottom 20%) - Based on history, scores in this category indicate that an adverse event such as a default, court judgement, personal insolvency or similar, is more likely to be recorded on a credit file in the next 12 months when compared to the average credit active Australian population as recorded on Veda's credit bureau.

Average (21% - 40%) - Based on history, scores in this category indicate that an adverse event such as a default, court judgement, personal insolvency or similar, is as likely to be recorded on a credit file in the next 12 months when compared to the average credit active Australian population as recorded on Veda's credit bureau.

Good (41% - 60%) - Based on history, scores in this category indicate that an adverse event such as a default, court judgement, personal insolvency or similar, is less likely to be recorded on a credit file in the next 12 months when compared to the average credit active Australian population as recorded on Veda's credit bureau.

In other words, the odds of no adverse events occurring on your credit file in the next 12 months are better than the average population odds. Hence this score has been classed as the good population grade.

Very Good (61% - 80%) - Based on history, scores in this category indicate that an adverse event such as a default, court judgement, personal insolvency or similar, is unlikely to be recorded on a credit file in the next 12 months when compared to the average credit active Australian population as recorded on Veda's credit bureau.

In other words, the odds of no adverse events occurring on your credit file in the next 12 months are more than 2 times better than the average population odds. Hence this score has been classed as the very good population grade.

Excellent (81% - 100%) - Based on history, scores in this category indicate that an adverse event such as a default, court judgement, personal insolvency or similar, is highly unlikely to be recorded on a credit file in the next 12 months when compared to the average credit active Australian population as recorded on Veda's credit bureau.

In other words, the odds of no adverse events occurring on your credit file in the next 12 months are more than 5 times better than the average population odds. Hence this score has been classed as the excellent population grade.

The Australian credit active population scores on Veda's credit reporting database are reviewed regularly calculated as required to account for population and economic changes.

Please note that the way the VedaScore is used in practice by credit providers may differ to the way we have displayed it in Veda's Credit and Identity portal. Each credit provider applies their own lending criteria and policies - and in some cases their own scores - which is why some lenders may approve your application while others will not.

How is the VedaScore calculated?

The VedaScore is calculated by applying Veda's statistical analysis model to the information held in your credit file at a given point in time. Veda has developed its scoring statistical models by looking at the credit active population at a point in time and determining which characteristics are the best predictors of the likelihood of an individual having an adverse, such as a default, recorded on their credit file in the next 12 months. Different attributes that make up a score have different weightings based on their predictive power.

The details in your file that may influence your overall score include:

  • Your payment history, that is, are there any overdue debts listed on your credit file
  • Number of credit enquiries on file
  • Number of credit enquiries in last year
  • Types of credit applied for
  • Shopping pattern, that is, number and type of lenders you have approached for credit
  • The dollar amount you are applying for
  • Public data including court judgements or court writs
  • Defaults including how many, whether they are paid and how recent they are.

VedaScore is a rank ordering tool and as such credit providers can see where you sit with respect to other credit active individuals on Veda's credit reporting database. It may be used as an additional tool in a credit provider's decision-making process. But lenders use their own criteria and policies when assessing applications and a decision may be made on the basis of reasons not reflected in either your VedaScore or your credit report.

How often is a VedaScore updated?

When you sign up for the Veda Access or Veda Plan we calculate your VedaScore every month and this is updated in your Veda Credit and Identity membership portal. You can also review your previous scores using Score Tracker which graphs your VedaScore history over time. The statistical analysis behind the scores is regularly monitored by Veda to help make sure it remains predictive.

What determines my VedaScore?

VedaScore is a statistical model that uses information on a credit file as held by Veda to generate a bureau score. The information used to derive the score has been shown to be predictive of the likelihood of an adverse event being recorded on a credit file in the next 12 months. There are a number of factors that are taken into consideration in generating the score. Depending upon the information these can positively or negatively impact your score. Here are some key contributing factors and an explanation of each.

Credit enquiries from particular industry groups
Research shows that risk is related to the type of industry the credit provider being approached is in. For example there is a different level of risk associated with approaching a non-traditional lender versus a bank or credit union.

Type of credit currently or previously applied for
The type of credit previously applied for can have an impact on risk. For example mortgages, credit cards, personal loans and store finance may carry different levels of risk.

Individual shopping pattern for credit
The type and frequency of credit enquiries can impact risk. Research shows that shopping around for credit more often and approaching different credit providers is typically a higher indicator of risk than infrequent applications for credit with a few credit providers. It is better to find out the product pricing without divulging your personal data so no enquiries are made. Then only divulge your personal data to the lender with the best price.

Number of consumer credit enquiries
The number of credit enquiries on your credit file may be an indicator of risk. In general, lower volumes of enquiries tend to have a positive impact on your score. If this is having a negative impact to your score, it is best if possible, to take a break from applying for new credit.

Amount of credit currently or previously applied for
The amount of credit (for example the size of a loan or credit limit) previously applied for can be an indicator of risk.

Directorship information
Directorship information on a credit file may impact risk. If you are a director it’s important to not only check your individual credit file but also your company’s credit file.

Age of credit file
The age of a credit file, which relates to the date a credit file was created, may be an indicator of risk. For example, a credit file that is relatively new may represent a different level of risk to an older file.

Age of credit file and pattern of credit enquiries
The spread of credit activity as it relates to the age of a file can have an impact on risk. For example, a relatively new credit file with many enquiries may represent a different level of risk to an older file with only a few credit enquiries.

Applicant information
The score takes in to consideration personal information on a credit file such as age, time at address and time in employment. These stability factors may contribute to risk.

Default information
All default information such as having overdue debts or serious credit infringements or clearouts on a credit file are an indication of increased risk. On the other hand, no default information would be seen as a positive impact to risk. It is strongly advisable to pay your debts on time. See Tips to prevent a default being listed on your credit file.

Specific default data
Specific details about the default can have a positive or negative impact on risk and hence your score. For example, unpaid defaults or recent defaults are higher risk and thus have lower scores. Paying all your defaults and avoiding new defaults may improve your score.

Court writ information
A court writ on a credit file is an indicator of increased risk. Conversely, no court writ information would reduce risk. If you have a court writ, you can have this removed if intend to fight this in court, you just need to provide Veda with an intention to dispute in writing. Whatever you do, do show up in court to dispute this, otherwise you will receive a judgement on file which last 4 years and has a negative impact on your score.

Default judgement information
A default judgement on a credit file is an indicator of increased risk. On the other hand, no default judgement information would be seen as a positive impact to risk. If you pay or settle all of your judgements and provide Veda with evidence of this, this may improve your score. Visit our Resolution Centre.

Proprietorship information
Proprietorship information on a credit file may impact risk. A proprietor is someone that owns a business. Not being a proprietor also has a small impact on your score. If you are a Proprietor, it's important to not only check your individual credit file but also any business credit files.

Credit provider information
Research shows that the type of credit provider making an enquiry on a credit file impacts on risk. For example, there is a different level of risk associated with approaching a bank, a store finance provider, a hire-purchase or a utility company for credit.

Specific default judgement information
Specific details about the judgement can impact your risk. Unpaid judgements indicate higher risk. A notation that a judgement has been paid or settled may improve your score. If you pay or settle all of your judgements and provide Veda with evidence of this, this may improve your score. Visit our Resolution Centre.

Lack of consumer adverse information
No consumer adverse information that is, no defaults, default judgements, court writs, and no insolvency on file can have a positive impact on risk.

Commercial default information
Commercial default information, that is, an overdue debt or clearout on a credit file can be an indicator of risk.

Commercial address information
Address information on the commercial portion of the file such as the time at a particular address may be a stability measure and could have an impact on risk.

VedaScore does not hold information such as race, religion, ethnicity, sexual orientation or marital status and these are not considered in the score.

What is the difference between a credit score and a credit file?

A credit file or credit report is the generic term given to the file or record a credit reporting agency, like Veda, has on individuals, companies and businesses. The term credit file or credit report includes not only consumer credit information held on individuals but commercial credit and public record information on individuals, companies or businesses. A credit file does not include a score. A credit file is different from a credit information file which is a defined term in the Act and refers only to consumer credit information. See What's in your credit file?

There are different types of credit scores, e.g. applications scores and bureau scores. In the case of VedaScore, it uses information in your Veda credit file to predict the likelihood of an adverse event occurring on your Veda credit file in the next 12 months. Credit scores are not static information but are dynamic as they relate to the information on your file at a point in time. Consequently, the score is likely to change over time.

How to improve your VedaScore?

If you want to try and improve your score then there are a few things you may be able to do:

Avoid unnecessary applications for credit.

  • When shopping around for credit, do your homework before you apply. Don't provide your personal identity data until you have done your research and found the best deal. Otherwise, each credit provider you apply with may conduct an enquiry on your credit file. Multiple enquiries can make it look like you are trying to get lots of new loans, not just one. Many credit providers view multiple enquiries in a short space of time negatively and also is a major cause for lower VedaScores
  • Only apply for credit when you really need it - Avoid applying for credit when you aren’t really sure you need or want the credit
  • Try to prevent default listings on your credit file A default remains on your credit file for 5-7 years and applicants with defaults are generally declined by credit providers more frequently than other applicants:
  • If you move out of a house, make sure you let credit providers including utility companies know you are moving and what your new address will be. If you do not do so you may remain legally liable for any utility accounts in your name at your old address.
  • Pay your accounts on time. If you are having financial difficulties, contact your credit providers as soon as possible to see if you can make a payment arrangement
  • If something happens that puts you into financial hardship such as losing your job, or you or a family member suffer from a serious illness, you can apply for hardship with lenders. In general this offers more favorable repayment terms until you get back on your feet. It is important to do this early and not wait until you get a default notice
  • If you are in dispute with a lender, telco or utility company about a bill, it is important to keep paying your bills whilst you work through it. If you are unhappy with the company’s response you can contact the relevant ombudsman
  • If you have defaults already
  • Pay off all your defaults. If you cannot afford to pay them all, see if you can come to a settlement with each lender. This can look significantly better to a credit provider than unpaid defaults
  • Avoid any new defaults as recent defaults may be looked upon more negatively than older defaults
  • Writs and Summons
  • If you have a court writ, Veda can remove this if you intend to fight this in court. To do this you need to provide Veda with a notice of intention to defend stamped by the relevant court. It is important not to ignore court writs as a default judgement may be entered against you by the court. Judgments remain on file which last for 5 years and has a very negative impact on your VedaScore. Visit the Resolution Centre.

Judgments

  • If you pay or settle all of your judgements do not assume that the Court or the credit provider will notify Veda of this fact. Instead provide Veda with evidence of this, this may help to improve your VedaScore. Visit the Resolution Centre.

To find out which parts of your credit file are impacting your VedaScore, Veda Access and Veda Plan customers can view the Score History table on the VedaScore tab. The table shows the score’s contributing factors and how large the impact is. If you would like to gain access to the Score Tracker upgrade today.

What is a good VedaScore?

VedaScores range from 0 to 1200. Put simply, the higher the number the better the score.

Why is it important to have a good VedaScore?

Many credit providers use VedaScore in their application processing system and as part of assessing any application for credit. Whilst the score alone will not determine whether or not your application is accepted and if you obtain credit, it can be a factor. Lenders may use the score alongside other lending policies and criteria.

It is important to note that the score is not a recommendation by Veda as to whether or not your application should be accepted or declined.

How your VedaScore can impact your application for credit

Your credit history, as held by Veda, is reflected in your VedaScore. VedaScore is a risk ranking tool that is used by many credit providers to help them assess your credit-worthiness. VedaScore is used by many credit providers in conjunction with their own application score and their own lending criteria and policies.

Each lender applies their own credit policies, which is one of the reasons why some lenders will approve your application while others reject it. Veda does not hold a score or credit rating on your credit file, nor does Veda make recommendations about whether an application should be approved or declined. VedaScore is not a recommendation as to whether or not an application for credit should be approved or declined.

Should I check my VedaScore regularly?

If you plan to apply for credit it can be worthwhile to check your VedaScore and obtain an updated copy of your credit file so you know what is on it before you apply for credit. If there is something unexpected, such as an overdue debt, then you have an opportunity to follow-up or even have the matter investigated before proceeding with your application for credit. It may be worthwhile checking your credit file on a regular basis (or signing up to a Veda Alerts product) to confirm that any enquiries on your file relate to you and that someone has not stolen your identity and applied for credit in your name. You can receive email alerts whenever certain changes occur to your credit file. See information on Alerts.

Does ordering my credit file impact on my VedaScore?

Keeping a regular check on your credit file by ordering copies or signing up for Veda’s alert service does not impact on your VedaScore.

However, it may indirectly help improve your score if there has been information listed on your file that does not relate to you, e.g. an overdue debt. You can then contact the credit provider to seek clarification and, if necessary, an investigation.

If my application for credit is successful but I don't take it up, does this impact on my credit file and VedaScore?

It might. If you do this regularly or make multiple applications for the same credit, then this is likely to be reflected in the number of enquiries on your credit file. A large number of enquiries or too many enquiries in a short space of time can adversely affect your VedaScore.

I'm a Company Director; What about the enquiries which relate to my companies -- would these affect my personal score? And if so, why?

It may have an impact depending upon a number of factors such as whether you have gone guarantor for a company loan, the status of the companies of which you are, or were, a director, and the type of credit (commercial or consumer). If a credit provider wishes to access both your consumer credit and commercial credit files as part of assessing an application for credit they will need your consent.

If all my debts are paid shouldn't my VedaScore be good?

If you have any overdue debts listed on your credit file, the fact that you subsequently pay them won't necessarily result in an improvement in your VedaScore. This is because regardless of whether or not the overdue debt was paid, the presence of the overdue debt on your credit file is strongly correlated with risk. It should be noted, however, that some credit providers may give you credit if you can demonstrate that you have paid the overdue debts listed on your credit file, where they would not give you credit if the same debts remain outstanding. Please also note that overdue debts are not removed from your credit file because they have been paid.

I don't agree with my VedaScore. What can I do?

Your VedaScore is generated based on the information in your credit file. If information in your credit file is incorrect and it was an enquiry or overdue debt listed by a credit provider we recommend you contact the relevant credit provider. If the error relates to other information you can contact Veda's Resolution Centre.

Insolvency, what does this mean to me and my credit score?

Veda does not score credit files where insolvency information is present so you will not have a VedaScore as part of Your Credit and Identity Portal. This includes bankrupt and non-bankrupt information. There are six categories of Insolvency:

  1. Bankrupt (excluding discharged, Part X and Part 1X)
  2. Part X Debt Agreement (excluding discharged)
  3. Part X Debt Agreement (discharged)
  4. Discharged Bankrupt (excluding Part X, and Part IX Debt Agreements)
  5. Part IX Debt Agreement Part (excluding discharged)
  6. Part IX Debt Agreement discharged.

Individuals can enter into Debt Agreements, in certain circumstances. They are not types of bankruptcies but are, in fact, a way an individual can avoid going into bankruptcy.

Why don't I have a VedaScore?

There are a number of instances where a VedaScore is not generated. If there is insufficient credit activity on a file or it is inactive you will not have a VedaScore. Once an enquiry is made or another credit event occurs like a default, a judgement or a court writ, there then is sufficient information to start generating a VedaScore.