A bad credit score can halt you in your tracks when you want to buy a new car, get a mortgage or take out a personal loan.
Fortunately, there's a lot you can do to improve your score and set yourself onto a path of financial confidence. But what exactly counts as a "bad" credit score and how can you fix it?
What is a bad credit score?
A bad or "below average" credit can be any score of 549 or under, but this will vary based on which credit reporting bureau you get it from. Each agency uses its own ratings scale and terminology for what it considers a bad credit score.
For example, a "below average" Experian credit score is any score of 549 or lower. In comparison, a "below average" Equifax credit score is 459 or lower, while an Illion credit score below 500 will be considered either a "low" score or "room for improvement".
Experian: 0 to 549 is a bad credit score
Equifax: 0 to 459 is a bad credit score
Illion: 1 to 299 is a bad credit score
What can cause a bad credit score?
Your credit report contains information about your financial history. Credit bureaus (such as Experian and Equifax) use this information to calculate your risk as a borrower, which is reflected in your credit score.
Missed repayments, loan defaults, debt agreements and bankruptcy are all listed in your credit file and can result in a low credit score.
If you have a poor credit score it can get in the way of the credit you want and could mean you're turned down by a lender.
Finder survey: How many Australians know what a good credit score is?
Response
Male
Female
Yes
65.65%
61.19%
No
34.35%
38.81%
Source: Finder survey by Pure Profile of 1016 Australians, December 2023
How long does bad credit last?
Thankfully, bad credit doesn't last forever and as long as you're taking steps to improve your credit score, you should see your credit report get better over time.
How long a particular credit enquiry will continue to impact your credit score will depend on what kind of bad credit mark it is.
Your repayment history information stays on your report for two years, while credit enquiries, payment defaults, overdue accounts, and court judgements will stay on your report for five years. Overdue accounts listed as serious credit infringements will stay on your report for seven years.
If there's been an error you can get in touch with your credit bureau and get them to reverse it.
How to improve bad credit scores
To fix bad credit you can take plenty of action to improve your credit score and improve the likelihood of being approved for a loan.
Check your credit score. Find a copy of your credit report and credit score for free with the Finder app. You'll also receive notifications whenever something changes in your report, so you can always stay on top of your finances. When you receive your score, you will receive information about what is most contributing to your bad credit rating. Check this report regularly for areas in which you can improve.
Pay your bills on time. When you stay on top of paying your bills and loan repayments, this can contribute to an improved credit score. It shows banks your improved financial discipline. Under Australia's comprehensive reporting system, your credit file contains positive and negative information about your history. So build on the positives and eliminate the negatives!
Pay off your debt. First check how much you owe and how many sources of debt you have. Try to focus on one at a time and work on a budget to cut back your spending wherever possible to bring your debt under control. Payments of $150 or more that are over 60 days late will stay on your credit report for 5 years, even after you have paid them. If you're struggling to repay your accounts, contact your creditor to discuss an alternative repayment plan to avoid defaulting on your payment.
Lower your credit card limit. If you have a high limit that you're not using, contact your bank to lower it.
Avoid making multiple credit applications. Don't make multiple credit applications in a short period of time, as this will lower your credit score and indicate to lenders you're under financial stress. You can use our chance of approval feature on the Finder app to see how likely you are to be approved for a credit card or personal loan, which won't put any dents on your record.
Seek expert advice. You can contact the National Debt Helpline on 1800 007 007 to find free financial counselling in your area if you feel you need a little more help. Financial counsellors offer independent expert advice on how you can manage your money and eliminate debt.
How long does it take to repair a bad credit score?
Your credit score will normally be updated once a month. That means that any efforts you do now to improve your score could see benefits in a month from now.
If you've got some long-term issues with your credit report, you may need to show that you've continuously been working on it. As a result, it could take up to a year or more for your score to significantly improve.
The good news is that you can start making these changes immediately to get your future self in a better financial position.
What happens if you have a bad credit score?
The higher your credit score, the more likely lenders will be to grant you a loan. The lower your credit score, the higher the risk of being forced to pay higher interest rates or being rejected for loans and credit cards. There's also a chance you're not eligible for 0% interest credit cards or loans.
Lenders check your credit file and credit score to determine the risk involved in lending you money and to ensure you can repay borrowed money in a timely fashion. If you have a less than ideal credit score or a few black marks on your file, this will raise red flags for the lender.
While you can't totally get rid of bad credit items on your report, there is a time limit for when they will be removed. All repayment history information will stay on your report for two years. Credit enquiries and applications as well as court judgments, summons and writs will hang around for five years, as will default payments.
But don't worry, it's not all doom and gloom. Your credit score is just one aspect of your finances that banks and lenders look at, so you can improve your chances through:
You're not alone if your credit score isn't quite where you'd like to see it. It's possible to improve your credit score with some bad credit indicators still on your file. The sooner you work on the issues dragging it down, the sooner you can reach a higher score.
What should I look out for in my credit file?
Your credit file will give you a few warning signs as to what is causing your bad credit. These include:
Payment history information. All active ongoing payments are listed. If you have any missed or late repayments it may lower your credit score.
Lots of credit enquiries. Credit enquires or loan applications are not necessarily bad but they remain on your file for five years. Having numerous enquiries listed in a short period of time can be a bad sign though. Generally, applying for credit once every three months will not contribute to a lower score so keep that in mind.
Defaults. Debts higher than $150 that are more than 60 days late are considered a defaulted payment. Even once you pay the debt, the default will stay on your credit file for five years. Any overdue accounts listed as a clearout or serious credit infringement will also appear. Serious credit infringements are defaults that are not paid off and will stay on your report for seven years. The creditor must make multiple attempts to contact you at your address without success before it can list a serious credit infringement.
Late and missed payments. Any missed or late payments will be recorded on your file and can reflect negatively on your ability to manage a line of credit.
Writs and summons to court. If you have been summoned to court because of debt or a financial issue, this will be listed on your credit file. This can happen if you can't settle the debt directly with a creditor.
Court judgements. Your file will also hold a record of the outcome of any court cases relating to your debts.
Bankruptcy information. This will be listed if you enter into bankruptcy and will stay on your report for seven years. Bankruptcy lasts for three years and means you have been legally declared unable to repay your debts.
Why tracking your credit score can help
Tracking your credit score is the first step to taking control of your credit score. Knowing where you sit is the top way to know how you can take action to get where you want to go.
The Finder app can help your credit score. We'll update it automatically for you each month and will let you know if your score changes. We'll give you the tools you need to work on your credit, including what's in your credit report, your chance of credit approval and how to improve your credit position. You can also connect all of your accounts in the one place to make it a one-stop shop for all your finances.
A bad credit score doesn't define you
The good news is – you are not your credit score. Even though it can feel disheartening, just because you have a sorry credit score doesn't mean you're a bad person. It could mean you sometimes flashed your credit card a few times too many or you missed a couple of car loan repayments when you were in a tricky spot.
Improving your credit is about what you want your credit to do for you. If you're aiming to buy a brand new car and lower your score enough to get a loan, then this will be a personal success for you. Either way, tracking your credit score is crucial for your goals and the Finder app can aid you every step of the way.
The top questions we've been asked about bad credit
You can get your free credit report and score from finder. You can also contact the bureau directly to get a free copy of your report within 10 days.
Yes, all applications for credit are included in your credit file.
Australia's three main reporting agencies are Equifax, Experian Australia and illion (formerly Dun & Bradstreet).
Some of Australia's credit reporting agencies operate credit file monitoring services to help you keep track of your credit score. If you request a free credit score from finder, we'll also notify you anytime something changes on your credit file so you can stay on top of your finances.
You may still have a credit file if you've applied for any other type of credit or borrowed money in some other way. For example, a mobile phone contract held in your name or interest-free store financing can both be reported in your credit file.
Want a better way to check your credit score?
Banks know your credit score, so why shouldn't you? The Finder app updates your score automatically each month and lets you know if it changes. Pop in your phone number below to get your download link.
Matt Corke is Finder’s head of publishing ventures. Prior to this he was head of publishing for Australia, New Zealand and emerging markets. Matt built his first website in 1999 and has been building computers since he was in his early teens. In that time, he has survived the dot-com crash and countless Google algorithm updates. See full bio
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If I pay a default in full will it then be removed from my credit report
Finder
FayeAugust 13, 2019Finder
Hi,
Thanks for contacting Finder.
I’m afraid that defaults will stay on the file for five years from the time it was listed. Unless, it’s erroneously listed, it’s not possible to remove a default if the five-year period has not been served. So, even if it’s already paid, you may need to wait for 5 years before it will disappear from your file.
Kind Regards,
Faye
KennyJanuary 2, 2019
I have a Court Summons with an outstanding debt listed. The debt is paid. Can I get this removed therefore increasing my credit score?
Finder
JhezelynJanuary 3, 2019Finder
Hello Kenny,
Thank you for your comment.
Yes, you can have it removed by contacting the lender or the creditor so they can submit a report to the credit reporting bureau. Another way is to file a dispute with the credit reporting bureau so they can investigate the issue. You can get more details about removing credit report black marks.
Should you wish to have real-time answers to your questions, try our chatbox on the lower right corner of our page.
Regards,
Jhezelyn
MarieJuly 23, 2017
Would like to know about my credit score which is in my case it’s most probably not too good. However, how and what can I do to fix it? Cheers. Marie
If it interests you, please request a free copy of your credit report/score.
Simply add your phone number to get our Finder app and start requesting your credit score.
Alternatively, you can click on the “Continue on web” if you wish not to get your score through the app.
A pop-up window would appear. Click on the “Log in” tab if you already have a Finder account. Click on the “Register” tab if you wish to create a new account.
Once you’re in, you can then request your credit score.
Hope this helps.
Cheers,
Jonathan
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If I pay a default in full will it then be removed from my credit report
Hi,
Thanks for contacting Finder.
I’m afraid that defaults will stay on the file for five years from the time it was listed. Unless, it’s erroneously listed, it’s not possible to remove a default if the five-year period has not been served. So, even if it’s already paid, you may need to wait for 5 years before it will disappear from your file.
Kind Regards,
Faye
I have a Court Summons with an outstanding debt listed. The debt is paid. Can I get this removed therefore increasing my credit score?
Hello Kenny,
Thank you for your comment.
Yes, you can have it removed by contacting the lender or the creditor so they can submit a report to the credit reporting bureau. Another way is to file a dispute with the credit reporting bureau so they can investigate the issue. You can get more details about removing credit report black marks.
Should you wish to have real-time answers to your questions, try our chatbox on the lower right corner of our page.
Regards,
Jhezelyn
Would like to know about my credit score which is in my case it’s most probably not too good. However, how and what can I do to fix it? Cheers. Marie
Hello Marie,
Thank you for sending your inquiry today. :)
We do have a guide that will help you repair your credit report.
If it interests you, please request a free copy of your credit report/score.
Simply add your phone number to get our Finder app and start requesting your credit score.
Alternatively, you can click on the “Continue on web” if you wish not to get your score through the app.
A pop-up window would appear. Click on the “Log in” tab if you already have a Finder account. Click on the “Register” tab if you wish to create a new account.
Once you’re in, you can then request your credit score.
Hope this helps.
Cheers,
Jonathan