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"Sorry, but your credit score's too low for this home loan."
Sarah sat across from her bank manager, stunned. She'd saved a solid deposit, had a great job, and always paid her bills. Yet here she was, dreams of her first home crumbling over three digits she'd never thought to check.
Your credit score shapes your financial life, often without you knowing it. It's the difference between a 'yes' and a 'no' on that rental application, the reason your mate got a better deal on their car loan, or why your mobile phone plan costs more than you'd like.
Think of your credit score as a financial report card - except this one follows you long after school's finished. Unlike your year 12 results, though, you can change this score. Better yet, you can check it for free.
This guide breaks down everything you need to know about credit scores in Australia. You'll learn what makes up your score, how to check it, and most importantly, how to improve it. No complex jargon, just straight talk about:
Ready to take control of your credit score? Let's start with the basics.
Remember school reports? A's meant you'd done well, C's suggested room for improvement. Credit scores work the same way - they're a snapshot of your financial behaviour.
In Australia, your score sits somewhere between 0 and 1,200, depending on which credit reporting body you check. Most scores fall between 300 and 800. Above 700? You're in good shape. Below 500? There's work to do.
Three main companies keep tabs on your credit score in Australia:
Each might give you slightly different numbers - like getting marks from different teachers. Equifax might rate you 720, while Experian shows 680. Don't panic. They use different calculations, but they're all looking at similar things, such as: your payment history, credit cards, loans, and bill payments.
Banks and lenders pick their preferred credit reporting body. For example, Commonwealth Bank might check Experian, while NAB looks at Equifax. Some Lenders may even check multiple credit reporting bodies. That's why it's smart to know your score with each one.
What's a "good" score? Here's a quick guide using Equifax's scale:
Your score changes as your financial behaviour changes. Pay your mobile bill late? Your score might drop. Clear a credit card debt? It could climb. Think of it as a financial fitness tracker - it goes up when you make healthy money choices, down when you don't.
Ever wondered what goes into your credit score? Like a cake recipe, it's a mix of ingredients - some matter more than others. While Australian credit reporting bodies don't disclose their exact formulas, here are the typical factors that influence your score:
Most Important
Very Important
Important
Contributing Factors
Your track record of paying bills matters most. Each on-time payment adds a sprinkle of goodness to your score. Late payments? They leave a bad taste that can linger for years.
What counts:
This looks at how much credit you're using compared to what's available. Maxing out your credit cards is like filling a glass to the brim - one wobble and it spills. It's not an exact science, but credit agencies typically like to see you using less than 30% of your available credit, and most importantly not missing any repayments.
Like a good friendship, longer credit relationships count for more. That credit card you've managed well for five years? It's worth more than one you got just last month.
Having different types of credit could help your score, as it indicates that you have been able to meet various lending criteria. A mix might include:
But don't go opening accounts just to tick boxes - each new application can temporarily drop your score.
Every time you apply for credit, it leaves a mark on your report. Too many applications in a short time? That's a red flag to lenders. Space out your credit applications like you'd space out your coffee hits - too many at once isn't healthy.
Some things you might think affect your credit score actually don't matter as much, such as:
It's not just about how much money you make - it's about how you manage what you have.
Did you know you can check your credit score for free? You've got a legal right to see your credit report once a year without paying a cent. Here's where to look:
Equifax, Experian, or illion
Driver's licence, Medicare card, passport, or utility bills
Through the bureau's website
Check for errors and track your score
Each credit reporting body is required to provide a free option to access your credit report:
While banks like Commonwealth Bank and NAB primarily use Equifax, they may also check reports from other credit reporting bodies. It's worth checking your score with all three.
You'll need to prove who you are with (with one or more of the following identification documents):
Your credit report isn't light reading, but key parts jump out:
Keep an eye out for:
Don't stress - errors happen. Contact the credit reporting body and:
If they drag their feet, contact the Australian Financial Complaints Authority (AFCA) - they're free and independent.
Set a reminder to check your report every year. Big changes coming up, like applying for a home loan? Check it three months before. That gives you time to fix any surprises.
Let's bust some common credit score myths that might be holding you back.
Not true anymore. Since 2021, most buy-now-pay-later providers report to credit agencies. Too many applications or missing a payment can ding your score, just like missing a credit card payment.
Wrong - unless you've got joint accounts. Your credit score is yours alone. But watch out for:
Nope. Checking your own score is a 'soft enquiry' (also known as an Access Seeker enquiry) - this type of enquiry does not affect the rating of your credit score. Only 'hard enquiries' (when you apply for credit) can impact your score.
They don't. Most negative information drops off after:
Be careful here. Many credit repair companies charge big fees for things you can do yourself for free. They can't remove accurate information, no matter what they promise.
Not these days. Your score builds from:
Wrong. Your score can bounce back. Recent behaviour counts more than old mistakes. Start making payments on time, keep credit use low, avoid making frequent and unnecessary credit applications and watch your score climb.
Your credit score affects more parts of your life than you might think. Here's what that number means in the real world:
A good score (700+) could mean:
For example, on a $500,000 mortgage over 30 years, a 0.5% lower interest rate could save you about $48 per week - that's thousands over the life of your loan.
Score above 700? You might see:
Below 600? You might need a larger deposit or face interest rates above 15% p.a.
Your score influences:
Many premium cards need scores above 750 for approval.
More landlords now check credit scores. A good score:
Bad credit? You might need to:
Some employers may check credit scores for financial roles. They're looking for:
Remember: They need your permission first, and it's usually only for financial sector jobs.
Ready to lift your credit score? Here's your game plan, from quick fixes to long-term strategies.
Start here:
Build momentum with:
Play the long game:
Red flags that need quick action:
Get your free credit report from all three bureaus:
Mark your calendar:
Need more help?
Remember, your credit score isn't set in stone. Small changes today add up to big improvements over time. Start with one step - check your score, set up automatic payments, or fix an error. Then build from there.
Your future self will thank you.
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