Find everything you need to know about your credit score in this definitive guide!

The definitive guide to Australian credit scores

  • We take you through what your credit score is and why you should care.
  • Learn how you can check your score and what you can do to boost it.
  • Discover the perks of having a high credit score.

Did you know one number can have a big impact on your financial future? While it might not be sexy to think about, if you want to buy a house or apply for a credit card or personal loan then you are going to need to get up close and personal with your credit score.

What is a credit score?

Excellent credit score

Your credit score, sometimes called a credit rating, represents how trustworthy your reputation is as a borrower. Information that is recorded on your credit report (we’ll go into detail on that later), is summed up to assign you a number, and financial institutions use this to decide how risky you would be if they lent you money. This number is important because it influences the amount of credit and the terms and interest rates a lender may offer you.

A higher score indicates to a financial institution that you are more creditworthy. There are a few credit agencies in Australia that can provide you with a credit report, and you may notice some differences in the reporting scales as a result of a different range being used to determine your score.

We work with a single reporting bureau (Experian) so you’ll receive a score from 1 to 1000.

Understanding your credit score result

Your credit score isn’t a number that will stay the same. It will change over time as the information on your credit report is updated.

There are five bands that your score can fall into.

Excellent: A score of between 800 and 1000. This means you are highly unlikely to have any adverse events harming your credit score in the next 12 months, and are unlikely to have trouble getting a loan based on your score. Of course, other factors will need to be taken into account when applying for credit, like your income and expenses.

Very good: A score of between 700 and 799. This means you are unlikely to have an adverse event in the next 12 months and most lenders would look favourably upon you.

Good: A score of between 625 and 699. This means you are less likely to experience an adverse event on your credit report in the next year and are in a good position to be approved for credit.

Fair: A score of between 550 and 624. This means that you are more likely than the average consumer to experience an adverse event in the next year. Getting approved for credit will be harder but not impossible.

Below average: A score between 0 and 549. This means that you’re more likely than the average person to have an adverse event being listed on your credit report in the next year. You may find it hard to get approved for a loan from a traditional lender.

Since there are a number of credit reporting agencies that use slightly different bands, if you are near the dividing line between each band, you may find another bureau will place you in a different band.

How is my credit score calculated?

Man using a calculator

Credit reporting agencies collect personal and financial information about you and values are allocated to each piece of information in your credit report. Factors such as your age, how long you've been with your current employer or at your current residential address, and any previous overdue or defaulted debts or bankruptcies, are all given a numeric rating.

Any credit accounts and credit limits you currently have (or had in the past) are included, as well as the identity of the credit providers, your repayment history, and the number of credit applications (not just approvals) you may have made within a given time frame.

In the past, your credit file just captured predominantly negative information about your financial history, including any missed payments, overdue or defaulted debts and bankruptcies. And while this information is still included, comprehensive credit reporting was partly introduced by 1 July 2018, to be fully rolled out by 1 July 2019.

We’ve explored comprehensive credit reporting in detail before, but essentially this means new information has been added to your credit report, including details of your repayment history for loans and credit cards. If you’ve been making repayments consistently and on time over the past two years, you’ll likely have seen an improvement in your score.

As a first step, it’s a good idea to review your credit file to ensure there are no errors on it.

How can I check my score for free?

You can use our free tool to check your credit score. It’s a secure and private way to access this information for free. You simply create an account, set up your profile and within seconds you’ll have your score.

You’ll then be able to check it as often as you like and see any changes in your score over time.

By knowing your creditworthiness before you apply for a loan or credit card you’ll be able to make confident decisions about whether you might be approved, and if you have a high score you may be able to negotiate better deals.

And don’t worry – your credit score won’t be affected by using this tool. You’ll simply be empowering yourself to be in control of your financial situation.

Man checking credit score on iPad

What are the top factors that affect my score?

You might think if you have a high income then you’ll automatically have a high credit score. Or if you have considerable assets built up you’ll increase your score. But that’s not the case. Neither income or assets improve your score. Sure, they will be taken into account when getting a loan, but not from a creditworthiness perspective – more from a borrowing capacity and ability to repay point of view.

Instead, your credit score is impacted by how responsible you are at managing the credit that you have. So if you have a high income but you forget to make payments on time, you may have a lower score than someone with a more modest income who is always on top of making their payments.

So what does impact your score? And what is recorded on your credit file?

  • Your repayment history: This is kept on file for two years and shows if repayments are made on time each month.

  • Credit enquiries: A credit enquiry is recorded when you apply for a credit product and stays on your file for five years. Recency and frequency will impact your score.

  • Defaults or missed payments: Defaults stay on your file for five years. You’ll have a default recorded if you have a payment of $150 or more overdue by greater than 60 days. Settling a default won’t remove it from your file, but if lenders see that it is a one-off and was settled quickly it will be seen more favourably.

  • Court judgements: These stay on your file for five years. Information is sourced from public records.

  • Bankruptcy: This includes any publicly-available information on bankruptcies and may include debt agreements and personal insolvency agreements. Generally, this will stay on your credit file for five years, but in some cases, it could be up to ten years.

  • Serious credit infringements: This happens if you’ve fraudulently obtained or attempted to obtain, credit, or you’ve stopped making payments and the credit provider hasn’t been able to reach you in more than six months. Serious infringements stay on your credit report for seven years.

Why does my credit score change?

Your credit score is not a static number. New information is added to your file on a regular basis. As an example, if you have recently applied for a credit product or a default has been recorded, this will see your score change.

With comprehensive credit reporting now in full swing, you’ll start to notice smaller and more frequent changes to your score. This is mostly due to the addition of your repayment history.

Entries on your file will also age over time and start to drop off your record. As we’ve mentioned above, some information might stay recorded for five years, and others for seven or more years. So even if you’ve done seemingly nothing, your credit score can change.

You may also find that an error could be accidentally recorded on your file, or it is recorded as a result of identity theft. These errors can affect your score, so it’s important to check your report regularly, rather than finding out when it’s too late and you’ve already applied and been knocked back for credit.

There is a mistake on my file. How can I get it fixed?

Elderly lady concerned

If you think your credit score is incorrect, the first step is to order a copy of the credit file on which it was based. You should be able to get a free copy of your credit file once per year, but it can take a few weeks to arrive.

Identify any errors and ask the credit provider who reported you, or the credit agency, to correct them. If you don't get a satisfactory result, you can apply to the financial services ombudsman for assistance.

How are credit scores used?

When you apply for a loan or credit, the financial institution will likely use your credit score and file along with the information provided in your application. If you have a high score, you’ll be considered less risky and more likely to get a better deal on credit.

It's an important score that you should care about because it impacts on your borrowing ability. Before applying for a loan or credit card, find out your credit score and know where you stand. Since all credit enquiries are recorded on your credit file, it’s better to know before applying if you have a low score. That way you can work on improving it before risking the chance of being declined.

You’ll also want to consider the impact your partner’s credit score can have on your ability to borrow. If you are applying for something like a joint home loan, even if your credit score is excellent, your partner’s score could stop you from being approved. So it’s a conversation you need to have as early as before you move in together.

Because if your partner has a low credit score this could mean you:

  • Can’t take out a joint tenancy

  • Might not be able to put both names on utility bills

  • Could be refused a personal loan or a mortgage

  • Are deemed a high-risk borrower so may only be able to access loans at higher interest rates.

How can I boost my score?

How to improve credit score

The are many reasons to boost your credit score. You might need to boost it quickly so you can apply for a credit card, or want to build up your score to buy property. Regardless of the reason, there are lots of actions you can take to start improving your credit score today.

We’ve gone into detail before on how you can do this. But here is a quick summary of the ways to get you started.

  • Always pay your bills (including rent) on time. Setting up direct debits can help.

  • Check your credit score and be alerted if it changes.

  • Don’t make too many enquiries for credit and limit your applications to when you are in a better credit position.

  • Do your research before you apply.

  • Make loan repayments on time. If you are worried you can’t make a payment, let your lender know.

  • Pay off outstanding debts.

  • Pay off your credit card balance each month and consider lowering your limit.

  • Diversify your credit.

  • Maintain credit over the long-term.

  • Slow down your purchases to give your savings a boost.

How can I benefit from a high score?

Man celebrating

If you’ve found out what your credit score is and discovered you’re in the Very Good or Excellent camp, you might be eligible for some additional perks that come along with it.

By showing a financial institution that you are a good payer and don’t come with a high chance of defaulting on a loan, you are more likely to be approved. Of course, factors such as income will need to be considered, but from a creditworthiness perspective, you are in a good place and will give yourself a greater choice of credit provider options.

You may also be able to get a lower rate of interest or better payment  terms. By knowing your score you can use this information in your negotiations for the best deal. Your high score could also allow better access to premium rewards cards with generous sign-up bonuses, higher earning rates and cashback offers.

Get your credit score for free

Completely free and seriously safe, check out your credit score for free now and put yourself in the empowered position of knowing where you stand.