What is a credit score?

Sub Editor · 4 November 2020
Do you know what your credit rating is? Understanding your credit rating can help you when applying for a credit card or loan.

A credit rating or “credit score” is a numerical score that represents how trustworthy your reputation is as a borrower. Essentially, your credit score sums up the information on your credit report into one number.

The higher the score, the more creditworthy you’ll likely appear to reputable financial institutions. If you find out your credit rating through a credit agency, you will receive a number between 0 – 1,200 that summarises the information on your credit report at that point in time. A higher score means you have a good credit rating, with a lower score meaning you have a bad credit rating.

In Australia, there are three main credit reporting agencies: Equifax, Experian and Illion, with each using different credit score ranges. To find out more about credit scores and check your score for free, visit our Credit Score Information Hub.

Your credit rating is a vital part of understanding your credit health. The system of credit reporting in Australia is known as ‘comprehensive credit reporting’, meaning both negative and positive information could be included on your credit report. The information in your credit report is used to calculate your credit score.

Your credit rating is important because it directly influences the amount of credit that a lender will make available to you as a borrower (your credit limit) and the interest rate and other terms the lender may offer. Lenders use this information to decide if lending you money is worth the risk. One reason you might like to check your credit score – and improve it – is if you are considering applying for a loan.

The table below displays a snapshot of unsecured personal loans on Canstar’s database with links to providers’ websites, sorted by Star Rating (highest-lowest) then by comparison rate (highest to lowest). The results shown are based on a three-year loan of $20,000 in NSW. 

Is a credit rating the same as a credit score?

Yes. In Australia, these two terms are used interchangeably and mean the same numerical score used by lenders.

What credit score should you aim for?

The higher the better, because your credit score affects your access to better loan and credit card deals. The credit score bands used in Canstar’s free credit score tool are from Equifax, and are as follows:

  • Excellent: 841 – 1,200
  • Very Good: 756 – 840
  • Good: 666 – 755
  • Average: 506 – 665
  • Below Average: 0 – 505

What affects my credit rating?

The list of things that can affect your credit report, for better or worse, is pretty lengthy, but here’s a rundown of some of the ways you can help or hurt your credit rating:

Good for your credit rating Bad for your credit rating
Paying bills on time Applying too often for credit cards or loans
Not applying for new credit cards or loans Applying and being rejected for a credit card or loan
Paying off outstanding loans and credit card debt Making late payments on your credit card or loan
Making your monthly repayments on time every month Bills or payments for at least $150 that are overdue by 60 days or more
Having a consistently low balance on your credit card Getting a balance transfer credit card but not repaying the balance transfer by the end of the promotional interest rate period
Having an available credit limit much higher than your usual credit balance Getting multiple balance transfer credit cards one after another
Hanging onto “good” credit accounts where you have faithfully made repayments on time for several years
Source: Canstar, How to improve your credit rating.

What won’t have a negative impact on your credit score is checking it. It’s a persistent – but completely incorrect – myth that asking to see your credit report will negatively affect your credit rating somehow, and for this reason some of us haven’t tried to find out our credit rating.

If you find your finances are stretched, our Budgeting & Saving section may be helpful. Recent research shows many Australians are financially stressed due to the impact of the coronavirus pandemic. We have spoken with a financial counsellor from the National Debt Helpline about what you can do if you feel overwhelmed by credit card debt.

Learn more about credit cards and credit scores

Cover image source: Ribkhan (Shutterstock).

Co-written by William Jolly. This article was reviewed by our Finance Editor Sean Callery before it was published as part of our fact-checking process.

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About the author:


Jacqueline Belesky is a Sub Editor at Canstar. She brings over 15 years of experience in corporate communications, media and publishing and holds a Bachelor of Journalism (Distinction) from Queensland University of Technology and postgraduate qualifications in Writing, Editing and Publishing from the University of Queensland. Jacqui was previously a Global Content and Media Manager for ABB in the UK and in Oslo, Norway, and has worked in Australia as a journalist for News Corp and editor for the Queensland Government, John Wiley & Sons and the University of Queensland. Jacqui’s articles have been published in The Courier-Mail, The Gold Coast Bulletin and on www.news.com.au. She also brings experience managing the editorial production of annual reports, financial statements, research papers and supplements on topics such as business sustainability and the global financial crisis. You can follow Jacqui on LinkedIn and Twitter, and Canstar on Facebook.

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