Credit score in Australia: How it works?

Check out how a credit score in Australia works and follow our tips to keep your creditworthiness high and well.

Credit score in Australia: everything you need to know about it

If you live in Australia, read this article to learn about your credit score. Source: Canva.
If you live in Australia, read this article to learn about your credit score. Source: Canva.

Today, you will learn how a credit score in Australia works. Then, keep reading to know everything you need about it!

Credit is part of our lives, whether for good or for bad. Actually, it is only a bad thing if you don’t have consciousness of how to use it responsibly.

Of course, everyone takes risks when using credit. Therefore, everyone is subject to sinking into debt.

But the chances are low when you know how credit works and how your creditworthiness affects your finances.

Then, continue reading to find out how credit scores and reports work in Australia.

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What is a credit score?

A credit score is a measure that reflects the creditworthiness of a consumer. It is calculated based on the credit reports of an individual.

That is, every time you apply for a credit card or a loan, for example, transactions will be recorded on your reports.

The same happens for payments. Each time you pay your bills on time, transactions are recorded. But it happens to bad transactions, too. 

For instance, each time you forget to pay a bill, it will be recorded on your reports, as well.

Therefore, credit bureaus or credit agencies analyze the data and calculate a score based on all reports recorded.

Each credit agency works in a different way. However, essentially, all of them have the same basis to calculate scores and distribute them to individuals and businesses.

In general words, a credit score is a number that shows how reliable as a consumer you are. So, the higher the number, the better you look for the market. And your chances of being accepted are higher, too.

How does a credit score work in Australia?

Keep a good credit score - it is essential for your finances. Source: Canva.
Keep a good credit score – it is essential for your finances. Source: Canva.

In Australia, several credit agencies work to import, analyze, calculate, and distribute the credit data of each individual. 

The largest one is Veda or Equifax, a credit reporting agency that, like any other, looks at your past and present debt, loans and loan inquiries, current credit limit, accounts opened and closed, and credit & store cards.

Let’s focus on Equifax, the largest credit bureau.

Credit scores calculated by this company range from 0 to 1200, as follows:

  • Below average: 0 to 459;
  • Average: 460 to 660;
  • Good: 661 to 734;
  • Very Good: 735 to 852;
  • Excellent: 853 to 1200.

As you can see, from 661 to 1200 you are considered a reliable consumer. Therefore, your creditworthiness is good.

On the other hand, below 460, it is less likely you be approved for credit at reasonable rates and conditions.

Usually, consumers with below-average credit can access credit solutions. But those solutions will be expensive or less flexible.

What does affect a credit score?

Your behavior as a consumer will directly affect your credit score. So, if you are a defaulter, your credit score will be impacted.

If the amount you owe is large, your credit score will be affected more seriously. Also, applying for many credit lines impacts your reports.

Since each application runs a hard inquiry on your credit reports, your score is affected every time you apply for credit.

Furthermore, it applies to credit cards and loans. It is important to mention that your personal details impact your score, as well.

For example, how long you have been employed in the same position or lived in the same address affects your score.

Moreover, the type of lender impacts positively or negatively your credit score.

Since there are different levels of risks associated with each type of lender, the riskier the lender, the more negative the impact will be.

How to improve your credit score?

There are many ways to improve your credit score. Source: Canva.
There are many ways to improve your credit score. Source: Canva.

Fortunately, there are some ways you can boost your credit score.

Take a look at the list of tips we have prepared so you can improve your creditworthiness.     

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1. Check your credit score

The first tip is to check your credit score. There is no way you can improve your creditworthiness if you don’t even know what your credit score is.

Therefore, you can access Equifax for free to check your information.

2. Make payments on time

One of the major factors that impact your credit score is defaulting on payments.

So, make financial planning and track your bills.

In case of forgetting something, try to negotiate it.

3. Be careful when applying for a new credit line

Be sure you only apply for a new credit line if you really need it.

Each time you apply for a new product, a hard inquiry is run on your reports.

4. Fix errors

Checking your reports is important because sometimes errors may occur. Therefore, you can access and ask for improvement.

Also, some errors can be a sign of identity theft. So, it is essential to stay tuned!

Recommendation: What you need to know about credit scores and loans

Now you know how credit scores and reports work, it is time to learn how they impact loan approvals.

As mentioned above, your credit score shows your creditworthiness to the market. So, as you know, credit decisions pass through credit score checks.

Applying for credit lines, loans, and other lending solutions is finding out if you are a reliable consumer in the eyes of the market.

Then, if you want to find out more about how credit scores and loans relate, continue reading our next post and learn everything you need to about credit scores and loans.  

credit score financial banking credit report

What you need to know about credit score and loans

What you need to know about credit scores and loans is here! Learn definitions and how your credit score and reports affect the chances of loan approval.

About the author  /  Aline Augusto

My name is Aline Mesquita; I'm a writer here on the blog, where I write about finance in general and other subjects. I have been working with content creation for ten years. Also, I'm post-graduated in Project Management, with expertise in SEO practices. Currently, I am studying finance, market trends, and cryptocurrencies.

Reviewed by  /  Aline Barbosa

Senior Editor

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