What it is and why it matters
Whether you're planning to buy a home, refinance a loan, or simply want to stay on top of your finances, understanding your credit score is a good place to start.
A credit score is a number that helps lenders assess how you've managed credit in the past. While it's only one factor considered when applying for finance, a strong credit score may improve your chances of approval and access to more competitive lending options.
What is a credit score?
A credit score is a numerical summary based on information contained in your credit report. Lenders may use this information when assessing applications for loans, credit cards and other forms of credit.
In Australia, credit scores are calculated by credit reporting bodies such as Equifax and Experian. Each provider uses its own scoring model, so your score may vary between providers.
Generally, a higher score suggests lower lending risk, while a lower score indicates a greater level of risk to lenders.
What information affects your credit score?
Several factors may influence your credit score, including:
- Whether you have made repayments on time
- The number of credit applications you've made
- The types of credit accounts you hold
- Defaults and other negative credit events
- Your overall credit history and how long you've managed credit responsibly
Under Australia's comprehensive credit reporting system, positive repayment history may also be included in your credit report, helping lenders gain a more complete picture of your credit behaviour.
What doesn't affect your credit score?
There are a few common misconceptions about credit scores.
Generally, your income, savings balance, employment status and personal assets are not included in your credit report and are not used to calculate your credit score. Lenders may still consider these factors separately when assessing a loan application.
How can I check my credit score?
The good news is that checking your own credit score does not harm your credit rating.
Australians can access their credit report and, in many cases, their credit score for free through credit reporting bodies.
You can obtain a free credit report from a credit reporting body such as:
- Equifax – equifax.com.au
- Experian – experian.com.au
ASIC's Moneysmart website recommends checking your credit report at least annually to ensure the information is accurate and up to date.
What should I look for in my credit report?
When reviewing your credit report, check that:
- Your personal details are correct
- Credit accounts listed belong to you
- Credit enquiries are legitimate
- Repayment history information is accurate
- There are no unexpected defaults or adverse listings
If you notice incorrect information, you can request a correction through the credit reporting body or your credit provider. Credit reporting bodies are required to investigate and correct inaccurate information where appropriate.
Simple ways to maintain a healthy credit score
While there's no quick fix, these habits may help support good credit health over time:
- Pay bills and loan repayments on time
- Only apply for credit when you need it
- Avoid submitting multiple credit applications within a short period
- Review your credit report regularly
- Contact your lender early if you're experiencing financial difficulty
The bottom line
Your credit score is an important part of your financial profile, but it doesn't tell the whole story. Understanding what's on your credit report, checking it regularly, and maintaining healthy financial habits can help you stay informed and prepared for future borrowing needs.
A few minutes spent reviewing your credit report today could help avoid surprises when you're ready to apply for your next loan.
Want to know where your money goes? Understanding your credit score is just one part of your financial profile. Use our Budget Planner Calculator to get a clearer view of your income, expenses and savings goals.
