Personal Loans

What Is A Credit Score?

Written by:

Katie Douglass


February 4, 2021

Last updated

June 6, 2023

Reading time

5 minutes

Katie Douglass

Katie Douglass is the Communications Manager at Oiyo and a writer. In recent years, Katie’s work has appeared in publications such as Marie Claire, InStyle, and THE ICONIC. She has a Bachelor of Creative Industries in Fashion Communication & Journalism from the Queensland University of Technology. At Oiyo, Katie is responsible for overseeing editorial strategy.

Whether you want to buy a house, apply for a credit card, get a new car, or take out a loan, a credit score plays an important role in almost every financial decision you make. Yet, according to research, two-thirds of Aussie adults don’t know what their credit score is.

If you’re one of those Aussies, you’re in luck. Below, we’ve put together a guide to help you understand one of the most important numbers in your life.

What is a credit score?

In a nutshell, a credit score (also known as ‘credit rating’) is a number calculated based on the personal and financial information in your credit report. It is used by lenders to measure a person’s creditworthiness as well as determine the amount of credit and interest rate they’ll offer.

Depending on the credit reporting bureau, a credit score will be a number between 0 – 1,000 or 1,200 and on a five-point scale (excellent, very good, good, average, and below average). Generally, the higher the credit rating you have, the more likely you’ll be able to repay a loan.

How is your credit score calculated?

While the main credit reporting bureaus in Australia use different methods to calculate your credit score, there are a few common factors they look at. We list them below in a handy table:

Personal information A credit report can include your age, employment details, and residential address.
Credit products Any credit products you have including credit cards, personal loans, home loans, business loans, etc.
Repayment history Any repayment history on credit cards, loans, and bills. This can include the amount borrowed, whether you paid on time, missed payments, etc.
The number of times you’ve applied for a loan or credit A credit report will list the number of applications made for a loan or credit. Generally, applying for a credit or loan multiple times in a short period of time lowers your credit score.
Any defaults, bankruptcies, court judgements, debt agreements. If you’ve had any defaults, bankruptcies, debt agreements, or court judgements against you.

How to find out your credit score

If you’re wanting to apply for a loan or credit, it’s important to know what your credit score is. Luckily, there are plenty of free online credit score providers where you can receive your report within minutes.

In addition, there are three main credit reporting bodies in Australia you can get your score from — Experian, Equifax, and illion. As we mentioned earlier, these agencies use different methods and score ranges. This means your score may differ between credit reports.

Generally, there’s a few things you’ll need to provide to receive your score. These can include personal details (e.g. name, D.O.B., residential address) and your driver’s licence or other forms of identification.

It’s important to note that you may have to pay if you are wanting to receive your credit report in less than 10 days or request more than one copy in a year.

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When you receive your credit report, make sure all details are correct. According to MoneySmart, you should check that:

  • Personal details i.e. name and D.O.B. are correct
  • All credit and/or loan products are yours

If there is anything incorrect, get in touch with the credit reporting bureau and ask them to amend it — this is free to do so.

What is a good and bad credit score?

As each credit reporting bureau uses a different scoring system, what’s considered a ‘good’ credit score can differ between them. However, the general rule-of-thumb is a credit score of 630 and above is considered ‘good’, while a score lower than 550 is considered ‘bad’.

A good credit score means you can be seen as a reliable borrower. This can improve your chances of approval for a loan or credit and get a better interest rate. On the other hand, a ‘bad’ credit score could make you appear less creditworthy. This could affect your ability to borrow and lead to higher interest rates.

Below, find out each main credit reporting bureau’s score range and what they mean:

Credit Score Range Experian
Excellent 800 – 1,000
Very Good 700 – 799
Good 625 – 699
Fair 550 – 624
Below Average 0 – 549
Credit Score Range Illion
Excellent 800 – 1,000
Great 700 – 799
Good 500 – 699
Room For Improvement 300 – 499
Low 0 – 299
Credit Score Range Equifax
Excellent 833 – 1,200
Very Good 726 – 832
Good 622 – 725
Average 510 – 621
Below Average 0 – 509

Tips to improve your credit score

If your credit score is low, there are steps you can take to improve it. After all, your credit rating isn’t fixed. Below, we’ve put together some tips to help improve your score:

Pay your bills and repayments on time

One of the ways you can help improve your score is making sure to pay your bills and repayments on time. To keep on top of payments, consider setting up a direct debit system and planning a budget. Plus, if you think you’ll be unable to pay a bill or repayment, it’s always a good idea to let your lender or creditor know in advance.

Don’t apply for credit too many times

When you apply for credit or a loan, a credit enquiry is left on your credit report. Regardless of your financial position, too many enquiries on your report in a short period of time can cause your score to drop. It also can appear to lenders that you are a high-risk borrower.

So, before you apply for credit or loan, make sure you meet the eligibility criteria. Generally, applicants need to be at least 18 years old, an Australian citizen or permanent resident, and be receiving a regular income.

Check your credit report

Make sure to check your credit report regularly and keep an eye out for any incorrect information that may be impacting your score negatively. If you do find any inaccurate details, you can ask for it to be updated or removed.

Lower your credit amount

While it might be tempting to apply for a high credit limit, it could also affect your credit score negatively. This is because your credit report takes into account the amount of credit limit, not how much you’re actually spending. If you have any unused credit limit, it might be a good idea to contact your creditor to get it reduced.

Want to learn more?

Check out our articles on all things personal loans.

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NODDLE is a consolidated online resource, we are not financial advisors. We work with a range of industry professionals and compliance check our articles to ensure factual accuracy. However, we do not provide professional financial advice. Consider seeking independent legal, financial, taxation or other advice to check how the information and ideas presented in this article relate to your unique circumstances.


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