A credit score is essentially like a high school grade for adults, but instead of how they scored in mathematics, it’s how they scored in their credit management skills. In this analogy, a credit report is like a report card, going into the nitty-gritty details of exactly how reliable you are as a borrower.

Credit scores are extremely important in the borrowing world, with many lenders basing their application assessments on the applicants' credit score. In particular, top-tier lenders are usually very strict in their credit score eligibility requirements. So, they only provide credit products to the best of the best. As such, having a good credit score is extremely important, if you plan on using credit now or in the future.

If your credit score has taken a hit, or you simply want access to the best interest rates available, there are ways to improve your credit score. Unfortunately, a bad credit score isn’t a simple fix, but over time, developing healthy financial habits should reflect in your credit score.

In this article, we’ll discuss:

What is a “good” credit score?

Before we get into what makes a credit score “good” or “bad”, let’s get some contextual factors out of the way.

A credit score is a number between zero and 1,000 to 1,200 (depending on the reporting agency) that is used by lenders to determine your ‘creditworthiness’. Meaning, it represents how well you manage credit products. This could include how you have managed any credit cards, personal loans, mortgages, car loans, or even utility bills.

In Australia, there are three main credit reporting bodies: Equifax, Experian, and illion. Since these entities are completely separate from each other, and use different methodology for calculating their credit scores, most people have a different credit score with each agency.

What is considered a “good” credit score varies from agency to agency, but a general rule-of-thumb is that a credit score above 600 is ideal. Let’s look at the breakdown of credit score tiers, from “bad” to “good”, according to each credit bureau.






0 to 505

0 to 549

0 to 299


506 to 665

550 to 624

300 to 499


666 to 755

625 to 699

500 to 699

Very good

756 to 840

700 to 799

700 to 799


841 to 1,200

800 to 1,000

800 to 1,000

What makes up a credit score

If you’re still wondering how you get a credit score, or if you even have one, there are a few known factors that are said to make up a credit score. However, most credit reporting agencies are pretty hush-hush about how exactly they generate their credit scores.

Credit scores are typically calculated based on the following information:

  • Your payment history

  • The total amount of credit owed

  • The length of your credit history

  • The types of credit you hold or have held

  • Any new credit

In some cases, you might actually have two credit reports: one using negative credit reporting, and another using comprehensive credit reporting (CCR). Meaning, you could have two credit scores with one agency.

Negative credit reporting, which was the old reporting system used by reporting agencies, only showed the negative credit management behaviour of a person. So, if a person missed a repayment, this would impact their credit score pretty significantly. But if they were reliable borrowers, and usually made repayments on time, this wouldn’t be reported and therefore wouldn’t show up their credit report.

To negate this, the CCR regime was introduced by the Australian Government in 2014. It was created with the purpose of providing lenders access to more in depth, rich data to use when assessing a person’s borrowing ability. While only the big four were mandated to implement this new system by July 2018, many lenders now primarily use CCR reporting.

So that you can visualise the different information that might appear on a negative credit report versus a comprehensive credit report, some common information has been listed below. Remember, information on a negative credit report will also appear on a comprehensive credit report, but not vice versa.

Information in a negative credit report

Information in a comprehensive credit report

  • Making late repayments

  • Missing repayments entirely

  • Submitting multiple applications in a short period

  • Any defaults, court judgements, formal debt agreements, serious credit infringements, or bankruptcies

  • Not paying off a balance transfer on time

  • The date any accounts are opened and closed

  • Credit limits

  • Frequency of repayments

  • Credit applications

  • Up to 24 months of repayment history

Tips to improve your credit score

If you know that you’ve had some of the negative information mentioned above listed on your credit report, there are ways to rebuild your credit score over time. Unfortunately, particularly ‘bad’ credit management mistakes, like bankruptcies or serious credit infringements, can appear on your credit report for up to seven years.

Check your credit report

An easy thing you can do to start off with is check your credit report to make sure all of the information is correct and accurate. If there is any incorrect information on your credit report, this could be influencing your credit score. Some things to keep an eye out for could include:

  • Duplicate listings or incorrect amounts of debt owed

  • Credit you didn’t take out

  • Repayments you made that haven’t been recorded

If you find any mistakes, you can contact the credit reporting body and they will fix it, free of charge.

Pay existing debts on time

Another thing that you could consider doing is making sure you’re paying all existing debts on time. This could include any credit cards, personal loans, mortgages, or any other form of credit you’re currently using. Your repayment history will be shown on your credit report for up to two years, so it’s important to demonstrate good repayment habits, which can indicate your overall reliability as a borrower.

A common way to avoid missing repayments is setting up a direct debit with your credit provider. This way, all you need to do is make sure there is enough money to cover the repayment on the day you choose.

Pay bills on time

While utility and phone bills are not technically forms of credit, late or missed bills can actually affect your credit score. In particular, a service provider bill that is over $150, and is more than 60 days late, can be lodged as a default on your credit report. A default can remain on your credit report for up to five years, and is considered to be a ‘black mark’ on a credit report.

Again, most utility providers allow you to set up direct debits to automatically deduct payments. It’s also important to always inform your provider if you’re moving house, so they don’t send bills to an outdated address. They might be able to send your bills via email instead of by mail, so you’ll never miss a payment.

Minimise new credit applications

If you’re trying to stay on top of your current debt repayments, it might be a good idea to hold off on taking out any new credit. Plus, all credit applications you submit, regardless of whether they’re approved or not, will show up on your credit report. This can affect your credit score.

Submitting multiple applications in a short time frame could indicate to lenders that you’re in financial distress, and can lower your credit score. So, if you’ve just recently submitted an application, it could help to try waiting as long as you can before submitting a new credit application.

Lower credit card limits

Your credit card limit is what is shown on your credit report, not the amount you spend. Meaning, if you’ve got a credit card limit of $20,000, this is what will show on your file - even if you’re only spending $5,000 of that. So, to whoever looks at your credit report, you’re using $20,000, not the $5,000 you’re actually using. If you can lower your credit card limit, this reduces the amount of active credit you have, which can increase the amount you can borrow. It could also positively affect your credit score.

If you need help, ask for it

If you’re struggling to keep up with your current repayments, it could be worth reaching out to your credit provider or service provider for some financial hardship assistance. Additionally, you could consider speaking to a free financial counsellor, who can give you advice and help you with things like budgeting and negotiating with your creditors.

Image by Dylan Gillis on Unsplash