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What is a good credit score?
Whether or not you have a good credit score could mean the difference between borrowing the amount you want on a competitive interest rate, or not being approved at all.
That’s why it’s important to understand what a good credit score is, and how you can work towards achieving – or retaining – one.
In Australia, there are three major credit reporting bureaus: Equifax, Experian and illion.
Each bureau has a credit scoring system that’s divided into five tiers:
- Excellent
- Very good
- Good
- Fair
- Poor/Below average
Borrowers will have a credit score that sits within one of these tiers, based on their past credit behaviour.
Each bureau follows a slightly varied credit score scales. Equifax grades credit history between 0 and 1200, while illion and Experian grade it between 0 and 1000.
| Credit score tiers | Equifax | Experian | illion |
| Excellent | 833 – 1200 | 800 – 1000 | 800 – 100 |
| Very good | 726 – 832 | 700 – 799 | 700 – 799 |
| Good | 622 – 725 | 625 – 699 | 500 – 699 |
| Fair | 510 – 621 | 550 – 624 | 300 – 499 |
| Poor/Below average | 0 – 509 | 0 – 549 | 0 – 299 |
Source: Experian.com.au, Equifax.com.au.
Despite the variance in scales, and the likelihood that your numeric score will differ between the credit bureaus, you will tend to find that your score generally sits within the same tier across all of them.
So, the question remains – what is a good credit score?
As the tiers suggest, a ‘good’ credit score is between 622 - 725 for Equifax, 625 - 699 for Experian credit score, and 500 - 699 for illion. Anything above this is even better.
Lenders will typically favour borrowers with the highest credit scores. This means that someone with a higher credit score will likely be offered a more competitive interest rate, or more favourable loan terms.
What determines my credit score?
Credit scores are calculated based on both the positive and negative credit behaviours that are recorded on your credit history. Some of the factors that may be taken into consideration include:
- Existing debts and the amount owing
- Existing credit cards and their credit limit
- Applications for credit products
- Repayment behaviours
- Late payments and defaults
How can I improve my credit score?
It’s always a good idea, for the sake of your financial wellbeing, to strive for an excellent credit score.
Whether you already have an excellent credit score that you want to ensure you retain, or you’d like to work on improving your score, there are actions you can make that just may have a positive impact.
Here are a few to get you started:
Ensure you pay your bills on time
Consider setting up a recurring reminder on your phone, or an automatic payment transfer through online banking, to ensure your credit card or loan repayments are made ahead of the due date. This will help you avoid relying on your memory alone to pay your bills on time.
Pay off existing debts
Focusing on paying down your existing debts before applying for more credit can help you demonstrate that you’re a responsible borrower.
Regularly check your credit history
It’s worth getting into the habit of regularly checking your credit history. One of the reasons for this is that inaccuracies can occur, but you won’t be able to have them corrected if you don’t know they’re there.
