Financial Education Series Financial Education Series

How do credit scores work in Australia?

Credit scores are an important part of your financial health. They represent your trustworthiness as a borrower. They can be the make-or-break detail that determines whether you’ll get a mortgage or a car loan. That’s why it’s so important to know how credit scores in Australia work. 

There are three different national credit reporting bodies (CRBs) that operate in Australia: Experian, Equifax and Illion.

Different CRBs collect information from companies that choose to report to them and use their own algorithms to calculate a credit score. 

It’s important to note that Experian and Illion have a score range of 0 to 1000, and Equifax has a score range of 0 to 1200.  

Take a look at the three score ranges:

Equifax (1-1200)

  • Good: 666-755
  • Very good: 756-840
  • Excellent: 841-1200

Illion (1-1000)

  • Good: 500-699
  • Great: 700-799
  • Excellent: 800-1000

Experian (1-1000)

  • Good: 625-699
  • Very good: 700-799
  • Excellent: 800-1000

Your credit score is based on the information on your credit report, including:

  • Credit accounts – the active ones and any accounts closed in the last two years
  • Repayment history from the past two years
  • Credit enquiries – every time you apply for any form of credit, it will appear on your credit report and remain there for five years
  • Defaults on a credit repayment
  • Negative entries (bankruptcy, court judgements, credit infringements)

A credit score can fundamentally affect your financial life. It plays a key role in a lender’s decision to offer you credit. Generally, people with low credit scores are considered to be high credit risk for lending institutions. That can lead them to charge interest at a higher rate, in order to compensate for carrying more risk. Your credit rating can also impact the loan amount a lender is willing to lend you.

It’s worth mentioning that there’s no such thing as an international credit score. This means that your Australian credit score won’t count if you move overseas. Therefore, when that’s the case, you will need to build your credit history from scratch.

If you would like to read more about credit ratings and how they affect your financial health, click here.