What Is a Good Credit Score in Australia?
Understand what a good credit score means in Australia and how to manage your financial reputation for better opportunities.
A credit score serves as a numerical representation of an individual’s creditworthiness. This three-digit number plays a role in various financial activities in Australia, influencing decisions on loan applications, credit card approvals, and mortgages. It provides lenders with a quick assessment of how reliably an individual manages their financial obligations.
Australian Credit Scoring Explained
In Australia, three primary credit reporting bodies (CRBs) manage and calculate credit scores: Equifax, Experian, and Illion. Each CRB uses its own scoring model and range, leading to variations in an individual’s score across agencies. For example, Equifax scores range from 0 to 1,200, while Experian and Illion use a range of 0 to 1,000.
What constitutes a “good” or “excellent” score also varies by CRB. For Equifax, a score between 661 and 734 is “good,” with scores above 853 being “excellent.” Experian views scores from 625 to 699 as “good” and 800 or above as “excellent.” Illion considers a score between 500 and 699 as “good,” with 800 and above categorized as “excellent.”
Since 2014, Australia has adopted comprehensive credit reporting (CCR), which provides a more balanced view of an individual’s credit history. This system includes both positive and negative financial behaviors, offering lenders a complete picture of an applicant’s credit management. This comprehensive data helps lenders assess risk more accurately.
Key Elements of Your Credit Score
Several factors contribute to an Australian credit score, with repayment history being a significant component. Paying bills and credit obligations on time positively impacts the score, while late or missed payments can lead to a reduction. Utility and phone bill payments, along with other credit products like mortgages and credit cards, all influence this history.
Credit utilization, the amount of credit used compared to total available credit, also affects the score. Maintaining low credit card balances relative to credit limits is viewed favorably by lenders. The length of an individual’s credit history is another influential factor.
The types of credit accounts held, such as secured loans, and the number of open credit accounts can play a role. New credit applications result in inquiries on a credit report, and too many applications in a short period can signal financial distress and negatively impact the score. Negative entries, such as defaults, typically remain on a credit report for five years. Bankruptcies can stay on a credit report for five years from the date of bankruptcy or two years from discharge, whichever is later, while court judgments are generally listed for five years.
Strategies for Credit Score Improvement
Paying all bills and loan repayments on time is fundamental, as timely payments directly contribute to a positive payment history and are a major factor in score calculation. Setting up automatic payments can help avoid missed due dates.
Reducing credit card balances and keeping credit utilization low, ideally below 30% of available credit limits, can significantly benefit a score. Limiting new credit applications is also advisable, as multiple inquiries in a short timeframe can negatively affect a score.
Regularly checking one’s credit report for errors is important, as inaccuracies can unfairly lower a score. If errors are found, dispute them promptly with the relevant CRB. Responsibly managing different types of credit, such as a mix of credit cards and loans, can also improve your score.
Checking Your Credit Score and Report
Individuals in Australia are entitled to a free copy of their credit report from each major credit reporting body: Equifax, Experian, and Illion. This free report can be requested once every three months, or more frequently if a credit application has been declined within the last 90 days. When requesting a report, individuals need to provide identity verification, using official documents like a driver’s license or passport.
The credit report provides a detailed record of an individual’s credit history, including payment information, credit inquiries, and negative listings. If inaccuracies or errors are identified, individuals have the right to dispute them. The CRB must respond to such disputes and correct verified mistakes.