Credit history and credit ratings

What’s the difference between your credit history and your credit rating?

Sounds like we’re talking about the same thing, doesn’t it? Well actually, there’s a difference - a credit history is sometimes referred to as a ‘credit report’. And a credit rating is sometimes referred to as ‘credit score’. Both credit history and rating go into what’s called your credit file. What on earth does all that mean?

Lenders use your ‘credit file’ as background information against your name in order to assess your behaviour when it comes to money matters. In other words, your credit history and rating will say a lot about what money means to you and whether you’re potentially a good candidate to borrow more. Let’s go into it further.

Credit history

Your credit history or credit report pretty much sums up your financial reliability. Basically, it tells the creditor or financial institution what you’re like when it comes to paying your bills. Do you pay on time? Have you missed a couple? Or have you missed a lot? This information can be made available to lenders any time you make an enquiry on lending money or making a credit card application. What your credit history will include:

  • a history of successful and unsuccessful credit applications
  • how many types of accounts you have
  • whether you’ve missed a paying a bill of any kind, including utility bills and fines
  • outstanding debt
  • a list of any lender that has received your credit report pending approval.

Credit rating

Your credit rating or credit score is a point system created from information in your credit file used by a third party like a landlord or lender to assess your credit risk at that particular time. This score changes over time to reflect your current financial behavior. Yikes! Sit up straight and hands on laps because it’s finger pointing time! Unless of course you’ve got straight A's all the way. Think you have a chance? Pat yourself on the back. Just to recap, your ‘score’ or credit rating is:

  • a total number of points
  • helps predict how creditworthy you are
  • is created by using a complex mathematical formula
  • takes into account your credit payment history and behaviour
  • looks at current amounts owed.

How do I check my credit rating?

Browse online for an Australian credit information provider like Veda. There are lots credit information providers who ask for money upfront or ask you to subscribe per year to receive your personal information. Although they may be legitimate companies who can tap into the data you need, there are plenty of free services you can get the right information from.

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Unsuccessful credit card application?

Did you luck out with your credit card application? Don’t worry. You have the opportunity to rectify your rating. There are certain money ‘behaviours’ you can adopt for long term goals and healthier money management. We’ll go more into that a bit later.

Are you unwittingly damaging your credit rating? Read this Mozo guide.

I’m creditworthy, why is my rating bad?

Being ‘creditworthy’ is what lenders refer to when they want to gauge how likely you are to repay your loan on time, if at all. It doesn’t matter what you personally think about this. What’s more, if your financial history has been a bit on the sorry side, the finance consultant you deal with can’t do anything about it. All the empty promises and excuses for missing payments, however legitimate is irrelevant. Your rating is purely objective and your personal life doesn't come into the equation at all.

So, it may be a good time to reflect on the negative outcome, take a new step forward and make the necessary changes in your spending habits to make your credit file count. Want to read more about this? Read this Mozo guide.

Tips for improving your credit score

It’s no secret that the path to a more impressive credit rating is to build a better credit history. It may seem impossible to do with so many missed due dates for bills, but you’ve gotta start somewhere! We’ve put our thinking caps on for the most practical and achievable steps to work your way to a healthier credit file. Let’s take a look:

  • Minimise frivolous spending so that you have more money in your kitty for expected and unexpected bills.
  • Set up a regular direct debit from your bank account using BPAY toward each individual company that you use the service of. From landlord to energy to mobile phone, you’re better off paying smaller weekly increments than paying one lump sum for each as it helps you manage what you have left to spend at the end of each week.
  • Pay any outstanding fines and bills. The more you delay payment, the more negative your rating appears. If the amounts are too high for the moment, call them individually to try and work out a payment plan to start to chip away at it. Remember, the more money you can afford to pay, the quicker your debt disappears.
  • Avoid using a credit card to pay off outstanding bills as it will inevitably leave you in more debt. It may be tempted to try and benefit from interest-free promotions but the temptation to use it on everyday items or go on shopping sprees may be to your credit history detriment.
  • Keeping your credit card balances low means credit providers will come to the conclusion that you can manage your spending better than those with their cards maxed out. How will they know this if you don’t reveal that information? Because credit providers can see everything! That’s why it’s really important to keep your credit history in tip top shape before considering making a new credit card application. The golden rule is to keep your balances within 30% of your credit limit.
  • Got some unused credit accounts lying around? Then it’s time to close unused accounts. What about saving it for a raining day? In the eyes a credit provider, all opened accounts are considered to be potential debt so if you really don’t need it, then it’s time to close it.
  • Did you know that each time you make a new credit enquiry it’s noted in your credit report? Even if you’re halfway through the application then decide to withdraw, it will be recorded. Every enquiry whether successful or not may influence the way lenders review your application. So you’re better off doing the research into which provider is the best for you, ensuring your ID is in order before taking the plunge – this way, your credit report remains as clean as possible.

I found a mistake on my report. What should I do?

Hmmm, that doesn’t sound good. But if you’ve found an error on your personal credit report, then you really need to do something about it. And you have every right to. This can be corrected free of charge with the guidance of sites like 

There you’ll learn about the next best steps to take when you want to dispute the way your credit history presents itself.

What kind of mistakes should I be aware of?

  • If you’ve paid an outstanding bill and it still displays as a debt.
  • If you’re no longer bankrupt, but you’re still listed as so.
  • If there’s a list of credit applications that are unfamiliar to you. (You may need to treat this matter as a fraudulent case. Start by reporting it to the lenders incorrectly listed in your credit history. They have a security department that take fraudulent matters seriously and promptly.)

Credit card alternatives

Credit cards are so widely used and make a super easy method for paying for anything from a cup of coffee to an electrician. But when you’re trying to rebuild your credit file’s reputation and want to start your credit history with a cleaner slate, than, using alternatives payment methods to a credit card is certainly the way to go. We’ve highlighted a few for you to consider:

Credit card alternatives Pros Cons

Debit card

  • Allows you to use your own money via a card that looks and feels like a credit card.
  • Widely accepted as they’re issued by Visa or Mastercard.
  • Safe, as it requires you to input your secret PIN number when making a purchase.
  • Save $$. Less or no fees as it’s using your own funds.
  • Doesn’t let you spend more than you have.
  • If you don’t keep track of your spending, you may end up dipping more into your funds than you intended.
  • Not recommended to use a debit card for making online transactions. Even though it’s issued by Visa or Mastercard, there is more safety and security with using a credit card online than using a card that connects with your own personal bank account.

Prepaid credit card

  • Looks and feels like a normal credit card
  • Widely accepted as they’re issued by Visa or Mastercard.
  • No chance of going over your limit as you cap off the value on the card before using it.
  • Convenient, safe way to shop online.
  • Monthly fees and admin costs may be higher than alternative cousins.


  • Old School way of paying for goods and services.
  • Easily keep track of what you’ve got available to spend.

  • Not safe if you’ve got a lot of it lying around.
  • Not as convenient as it’s impossible to shop online.


  • Designed and owned by eBay for safe online purchases.
  • Make reliable transactions from either desktop or mobile app.
  • Funds may take 3-5 business days to reach recipient or business.
  • Not every e-store offer Paypal as a payment option.

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