What is a credit score in Australia and how is it calculated?

What is a credit score?

A credit score is a three-digit number that sums up your credit history. In Australia, the three main credit reporting bodies are Equifax, Experian and Illion. Each uses its own model, so your score can vary slightly between them.

The score is built from your credit report, which includes past loans, credit cards, repayment history, credit enquiries, defaults and bankruptcies. Lenders use this number as a quick gauge of risk.

Credit score ranges in Australia

Equifax scores range from 0 to 1,200. Experian and Illion use 0 to 1,000. Despite the different scales, the bands are broadly similar:

• Below average / poor: higher risk of default; mainstream lenders may decline or offer less-favourable terms.
• Average: some mainstream lenders will approve, but rates and limits may be tighter.
• Good: most lenders are comfortable; you qualify for standard products.
• Very good to excellent: best rates, highest borrowing power and fastest approvals.

What affects your credit score?

The biggest factors are repayment history, credit enquiries, the age of your credit file and the type of credit you hold.

• Late or missed payments on loans, cards or utilities reduce your score.
• Multiple credit enquiries in a short period suggest financial stress and can lower your score.
• Defaults, court judgments and bankruptcies have a strong negative impact.
• A long, clean credit history with low balances and on-time payments builds your score over time.

How to check your credit score

You are entitled to a free credit report every three months from each bureau. Many apps and websites also offer free credit-score checks with monthly updates. Checking your own score does not hurt it.

Before applying for a home loan, review your report for errors — incorrect defaults, duplicated enquiries or outdated addresses can all be disputed and removed.