What Is A Credit Rating Or Credit Score?

Co-author: James Hurwood

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 credit-worthy you’ll likely appear to reputable financial institutions. If you find out your credit rating through a credit agency like Equifax or Experian, 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.

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.

Your credit rating is a vital part of understanding your credit health. Find out what your credit rating is – here’s how to check your credit rating – and keep tabs on it by regularly checking your credit rating.

For more information, you can read up on how credit reporting works and what your credit report will include.

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 provider name (alphabetically). 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 are as follows:

  • Excellent: 833 – 1,200
  • Very Good: 726 – 832
  • Good: 622 – 725
  • Average: 510 – 621
  • Below Average: 0 – 509

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.

But as we said, this is a myth. Checking your credit history is a completely harmless exercise, and like we said, it’s even free to do this once a year. To find out how to check your credit rating, we’ve got an article on that exact topic!how to prevent a negative credit rating

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