What is a good credit score in Australia?

Want to tackle your finances? Finding out where you stand as a borrower can be a good place to start.

Your credit score gives banks and other lenders a general picture of how reliable you are as a borrower. If you have a good credit score, this signals that lending you money is likely to be less of a risk. But how do you know if you have a good credit score? And what if your score is currently low and you want to increase it? We explore these questions below.

What is a credit score?

Credit providers, such as banks and credit card providers, are required to pass on certain information about your financial behaviour to credit reporting agencies. This is compiled into a credit report. Your credit score is calculated based on the information in your credit report. This report shows a detailed record of your history as a borrower and includes information such as how much you have borrowed in the past and whether you have paid the money back on time, as well as the details of any credit card or loan applications you’ve made recently.

Your individual credit score will usually sit somewhere on a scale of zero to 1,000 or zero to 1,200, depending on which credit reporting agency you go through. In Australia, there are three main credit reporting agencies: Equifax, Experian and Illion.

Because each agency uses different credit score ranges to categorise consumers’ scores – as well as having different ways of calculating the scores – what constitutes a ‘good’ credit score will really depend on which agency you’re asking. Generally, however, a higher credit score is considered better because it indicates a more reliable borrowing track record, and as a result, a lower credit risk.

→ You can check your credit score for free

Just to recap, here definitions of some key terms that might help:

• Credit Score: A credit score represents how trustworthy credit agencies have assessed your reputation to be, as a borrower as well as how likely you are to pay your bills on time. The higher the score, the more creditworthy you’ll likely appear.
• Credit Report: A credit report is what your credit score is based on, and is what a credit reporting body produces. Sometimes also known as a ‘credit summary’, the document contains a summary of your credit history, which can include your credit enquiries, bill payments, any defaults, court judgements and how much credit you currently have (for example mortgages or credit cards).

What is a good credit score?

What is considered a ‘good’ credit score depends on what you need to use it for, and other variables, such as your lenders’ approval criteria. Having a higher credit score than average for your age may mean lenders are more likely to approve your application for credit or a loan compared to if you had an average or below average score. In some cases, it may also have a positive impact on how much they will lend you, the interest rate they charge and other credit or loan terms.

How do credit agencies classify a ‘good’ credit score?

Different reporting agencies have different definitions of what scores fall into the ‘good’ credit score band.

Equifax:

Looking at Equifax credit scores, a score between 661 and 734 is considered ‘good’, a score between 735 to 852 is ‘very good’, and if your score is above 853 it’s viewed as ‘excellent’.

• Below average: 0-459
• Average: 460-660
• Good: 661-734
• Very good: 735-852
• Excellent: 853-1, 200

Experian:

For Experian credit scores, a score between 625 to 699 is considered ‘good’, 700 to 799 is ‘very good’, while scores of 800 and up are deemed ‘excellent’.

• Below average: 0-549
• Fair: 550-624
• Good: 625-699
• Very good: 700-799
• Excellent: 800-1, 000

Illion:

Then looking at Illion, it considers a score of 500 to 699 to be ‘good’, 700 to 799 to be ‘great’, and 800 and above to be ‘excellent’.

• Zero score: 0
• A low score: 1-299
• Room for improvement: 300-499
• Good: 500-699
• Great: 700-799
• Excellent: 800-1, 000

Get your free credit score and summary

What is a bad credit score?

Having a bad credit score may mean some lenders will be reluctant to give you a loan or other credit product, or, depending on the loan type and lender, they may charge you a higher interest rate compared to someone with a good credit score. This is generally because you would be seen as a higher risk and less likely to be able to repay the credit.

So how low does a credit score need to be to be considered ‘bad’? Equifax considers a score of 459 or lower to be ‘below average’, while Experian views a score below 549 as ‘below average’, and Illion considers a score of 299 or under to be a ‘low score’.

Explore further→ Why did my credit score drop?

What factors affect your credit score?

While every credit reporting agency is different, some of the most common factors that can affect your credit score are:

• Your repayment history (making loan or credit repayments and paying bills).
• The number of credit applications or enquiries you have made.
• Negative information such as defaults (where you fail to pay back a debt), bankruptcies and court judgements against you.
• Personal details like your age and how long you’ve been at your current job and residential address.
• How far back your credit history goes – generally it begins the first time you apply for credit.

Lenders can also see some of your positive financial behaviours on your credit report, such as when you make loan repayments on time. This is designed to give lenders a fuller picture of your credit history.

How can I check my credit report?

You can check your credit history by requesting a credit report from a credit reporting body in Australia (Equifax, Experian and illion). According to the Australian Government’s Office of the Australian Information Commissioner (OAIC), a credit reporting body must give you free access once every three months. A fee may be payable if you want to access it more than once every three months. But credit reports might not include all information, such as your actual credit score. You can check your credit score using third-party tools, such as Canstar’s free credit score tool.

Canstar’s credit score tool can access your credit report details from Equifax using the information you provide. The gathered information is then presented in a dashboard, so you can see what factors could potentially be influencing your credit score. When you use Canstar’s credit score tool, you create an account, which you can log into to check for any changes, as your credit score is updated every month using data from Equifax, which will then be reflected on your Canstar account dashboard.  This way, you can check back in more regularly to see if there are any changes to your score, as well as identify any potential errors. Using a third-party tool does not impact your credit score.

→ Check your credit score for free with Canstar

How can you improve your credit score?

Remember, your credit score is not fixed. It is calculated based on what information is available at that point in time, Equifax explains. Therefore, it can fluctuate as new information is added to your file. Negative entries will also drop off your credit file after a certain period of time.

If you’re looking to boost your credit score, here are a few things you could do:

• Make sure you make credit repayments and pay bills on time – steps such as creating a monthly budget to manage money coming in and out, and scheduling automatic payments for bills and other repayments, could help with this.
• Limit new applications for credit or loan products where possible.
• If appropriate, consider lowering the limit on any credit cards you have.
• Regularly check your credit report and make sure the information is correct – if it isn’t, you can ask to have it changed, or for comments to be added to your report. It’s free to update your credit report or remove an incorrect listing.

For more ideas, read our article on ways to help improve your credit score. Our Budgeting and Saving Hub may also be helpful.

If you are feeling overwhelmed by your financial situation, there is help available. You might want to ask your lender for financial hardship assistance or contact a financial counsellor for help. You can speak to a financial counsellor for free by calling the National Debt Helpline on 1800 007 007.

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