Where's the line drawn between good and bad credit and how can you improve your score?
Credit scores can range between 0 and 549 for a poor score and up to 800 and 1,200 for an excellent score. Lenders use this number and your credit report to assess your application when you apply for a credit card or loan.
So, do you have a good or bad credit score? You can use this guide to order a free copy of your report and score, pick up tips to fix your credit score and understand what behaviours can have a negative impact on your financial history.
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What is a good credit score?
A good credit score usually sits between 800 and 1,200. The exact bracket may vary depending on the credit reporting body you get your credit score from. For example, if you get your free credit score from finder it will be delivered from Experian and it will be a number between 0 and 1,000. However, Equifax's credit score system rates credit scores between 0 and 1,200.
See how the credit score systems break down below:
| Credit band | Experian | Equifax |
|---|---|---|
| Excellent | 800-1,000 | 833-1,200 |
| Very good | 700-799 | 726-832 |
| Good | 625-699 | 622-725 |
| Fair / Average | 550-624 | 510-621 |
| Weak / Below average | 0-549 | 0-509 |
What is a bad credit score?
As you can see in the table above, credit scores between 0 and 624 are considered bad. If you're applying for a credit card in Australia, you'll usually need a good or better credit score to receive approval. If you do have a low credit score, there are steps you can take to increase it and improve your financial history.
How can I improve my credit score?
If you have a credit score below the "good" threshold, here are some ways you can improve your score:
- Consolidate your debts. If you're struggling to pay off multiple debts, you can consolidate them into one account. For example, you could consolidate several credit card debts onto one card with 0% on balance transfers and pay it off with no interest for a promotional interest. You can also compare personal loans that are designed for debt consolidation. Not only are your debts easier to manage because they're under one account, you should save on interest costs by choosing a card or option with a low interest rate.
- Make payments on time. The last two years of your repayment history is now listed on your credit report, so it's important to make your repayments on time. If you are late with one or two repayments just make sure you keep up with all of your following repayments.
- Establish healthy accounts. If you don't have a credit card or loan, you can also demonstrate positive repayment behaviours by paying accounts such as your mobile plan, internet plan, electricity account on time.
- Lower your credit limits. The credit limits of your open credit accounts are listed on your report, but not how much debt you have. So if you have three credit cards with high limits but only a bit of debt, it still may have a negative effect on your score. Reduce your unused limit for an easy credit score win. However, keep in mind that lowering your credit score can will impact your credit utilisation ratio and could hurt your credit score if you have a high debt to credit limit ratio. You can weigh up the pros and cons of reducing your credit limits in this guide.
- Demonstrating job stability. A steady income (such as staying in the same job for a few years) demonstrates responsibility and your ability to repay to lenders.
- Rental and home ownership. Long-term rental or homeownership can also shows lenders that you are capable of making regular repayments and can manage other loans.
- Don't make too many credit card applications. Each credit application you make shows up on your credit report regardless of whether it is approved. Having numerous credit applications on your report in a short space of time will have a negative effect on your credit score. If your credit card application is rejected, you should avoid applying for another one until you've had time to improve your credit score and ensure you're eligible for the card.
Learn more ways to improve your credit score
What can cause a bad credit score?
From late payments and numerous credit card applications to defaults and bankruptcy, here are some of the factors that can lead to a low credit score:
- Numerous credit accounts and applications. Having too many loans to your name isn’t a good look because it puts in question your ability to manage and repay all of them at once. All loan applications stay on record for five years.
- Credit enquiries. Every time you apply for credit, the lender makes an enquiry on your credit history. This enquiry itself is then recorded on the report going forward, leaving a trail of credit enquiries that other future lenders will not look favourably upon. These stay on record for five years.
- Late or skipped payments. Poor payment habits can be a warning sign to potential lenders, so it is always better to make a repayment on time, even if it’s a small or partial amount. It's also important to remember that loan repayment history stays on your record for two years.
- Credit defaults. This happens when a lender takes action to retrieve an outstanding payment and stays on your record for five years.
- Court writs and summons. These legal blemishes stay on your record for four years.
- Serious credit infringement or clearouts. If you fail to make payment and the creditor is unable to contact you for more than six months, a serious credit infringement will be marked on your record for seven years.
- Bankruptcy and insolvency. These will stay on your report for five years after the start of insolvency, or two years after the insolvency ends, whichever is longer.
How to repair bad credit in Australia
How can I check my credit score?
You can order a copy of your credit report through a credit reporting bureau or for free through Finder. Follow the link below to sign up and get yours today.
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Hi, I have a ANZ credit card with a limit of 14K but I only use 10% of it every month (fully repaid each month). I wish to close this card due to its annual fee. Would closing it decrease my credit score?
Appreciate your answer.
Thanks – Joshua
Hi Joshua,
Thank you for leaving a question.
No, closing your credit card account will not lower your credit score as long as you have paid the credit card in full prior to closing it. What lowers your credit score is being delinquent on your payments which is reported by your creditors to the credit bureaus negatively. Hope this helps!
Cheers,
Reggie
I notice on my credit file certain things that don’t apply to me how can I get them removed from my file
Hi Michael,
If you need to remove something from your credit file you might need to a credit repair. You can check the further details here.
I hope this information has helped.
Cheers,
Harold
Ifself support only can i still have chance to get a credit card? My fiancee sending me money every month.
Hi Joy,
Thanks for your question.
Most if not all credit card brands require a certain form of income (that you can support with proper documents) to get approved. Some require income from work while other also accept Centrelink benefits as a form of income. If you are not currently working or receiving Centrelink benefits, you may find it difficult to get a credit card.
Nevertheless, you may want to compare low-income credit cards on this page. Please read through the eligibility criteria to apply for each card, before submitting your application.
Cheers,
Anndy
I have low credit score but no defaults etc what are my chances getting a credit card
If I have a credit score in the top 20% does that mean I also have a good credit rating? Can u have a good score but a bad credit rating? Ta
Hi Sarah, thanks for your inquiry!
Your VedaScore sums up your credit file in a number between 0 and 1200 (also known as the credit rating). The higher your VedaScore, the more likely you’ll be accepted when applying for credit.
I hope this helps.
Cheers,
Jonathan
Hi Bella, thanks for your inquiry!
Aside from an individual’s credit score the bank also takes into account your income, liabilities and other information. If you meet the minimum application requirements for a card then you will be eligible to apply. You may like to compare low interest rate credit cards, which have lower requirements than other types of credit cards.
Cheers,
Jonathan
Kulwinder Malhi
My credit rating 650
I have apply to many applications
All applications on my file
How removed application on my file
Hi Kim, thanks for your inquiry!
To remove applications on your file you can seek help from a credit repair agency.
Cheers,
Jonathan
hi i have been bankruptcy from 2002 to 2007 after i the time i pay payments to government now i still go problem with same bank my record no change and i can get to the banks after 8 years thanks
jovan
Hi Jovan, thanks for your inquiry!
The bankruptcy listing remains on your credit file for two years from the annulment date, or five years from the beginning of the bankruptcy – whichever comes later. If the record is still on your credit file you may like to consult credit repair services which can help fix incorrect records on your file.
Cheers,
Jonathan
Hi,
I have two utility defaults on my credit rating, how ever they have been paid. and accounts paid. i was wondering if their is a way i can get them removed? i am wanting to consolidate some debt with a personal loan, how ever i don’t want to make my credit worse by applying and getting declined.
Thanks
Hi Sj, thanks for your inquiry!
If a negative mark/ record has been resolved generally it can be removed from your credit file by consulting with a credit repair agency. They will investigate your negative listings and if they are able to remove them they will go about the necessary removal process for you.
Cheers,
Jonathan
I have a Veda score of “Average” or 520, but with Experian its only 270 and “below average”. I have not made any applications for credit in the last 12 months. I am confused as to the differences between the scores and am wishing to apply for a credit card within the next month. Obviously I would with fro a provider to look at the Average score rather than the below average score.
Hi Adam, thanks for your inquiry!
Different issuers use specific credit agencies such as Veda or Experian. Their credit rating criteria is not actually disclosed to the public so unfortunately we do not have the details on how they calculate an individual’s credit score. If you meet the application criteria for a credit card and do not have a bad credit history then you will be eligible to apply for the credit card.
Cheers,
Jonathan
Hi I have checked my credit files and They are clear. I own my own home outright and i have no debts of any kind . I always pay my bills on time. My income is a Government pension which i receive every fortnight. I recently applied for a credit card and was rejected. Why? and is there any credit card that i can apply for without having a credit history. I feel like i am being punished for not having a credit history at all maybe i should not have paid cash for everything i own. I just wanted to have a credit card for emergencies only. can you advise me on where to go? to get the best credit card and establish a credit rating
Hi Ian,
Thank you for your questions and we’re sorry to hear about your rejected application.
Although most credit card issuers will require the cardholder to have a good credit history, a low rate credit card has lower income requirements and may be more likely to accept an applicant with a limited credit history.
Here’s a comparison of some of the low rate credit cards available on the market.
You can also read over this page to gain some insight into why your application may have been declined.
However, before you apply for another credit card, you may wish to speak with some credit card issuers directly to discuss your options and chances for acceptance, as several rejected credit card applications will have a negative impact on your credit rate and reduce your chances of approval even further.
I hope this has helped answer your questions.
Thanks,
Sally
Hi,
I have a judgement on my file,due for deletion in December, added 5 years ago now and I have had no credit since. I am looking to apply for some interest free credit on some house hold goods. My rating is in the bottom 20%. What are my chances of being approved? Will my score increase by a lot in December? And, can I get it removed sooner?
Hi Ren,
Thank you for your comment.
If you continue at this rate, it can be assumed that your credit file will continue to improve by December. However, as a financial comparison service, we are unable to confirm exactly how much it will have improved by then.
As credit issuer’s have varying eligibility requirements regarding different credit applications, it is also difficult to confirm whether or not your application will be approved.
As far as having the judgement removed from your file, unless it is an incorrect statement, then you’ll be unable to have it removed before the set deletion date.
To gain a greater insight, you may need to get in touch with a credit advisory service to discuss your current credit rating.
I hope this has helped answer your question.
Thanks,
Sally