Credit scores: what you need to know

12 September 2024

Chances are you’ve recently paid for something on credit – it’s a big part of our everyday lives. Credit can help us pay our utility bills, buy a home or a car, take a holiday and cover our living expenses.

And when it comes to providing credit, lenders need to make sure you’re in good financial shape and you won’t struggle to repay them.

What’s a credit score?

Your credit score is a single number (between 0-1200), that indicates how you have maintained scheduled payments across all your credit products and bills. A higher score reflects where your minimum payments are continuously made on time.

Your credit score is based on each lender’s requirement to send your repayment history for each loan, credit card or utilities bill, to a credit reporting body. These credit reporting bodies continually gather all the data and create a credit score.

The good news is that it means your credit score will change: so if you had some late payments and then were able to resume making payments on time, this will improve your credit score.  

Lenders will use this score, the information provided in your application, alongside their own risk criteria, to decide if they can lend you money, how much they can lend and for some lenders, if they used ‘risk based pricing’, the interest rate.

The three main credit reporting bodies in Australia are Equifax, Experian & Illion, each create their own credit score from the data in your credit report.

What is a credit report?

Your credit report is a detailed record of your credit history such as:

  • Personal information to make sure the report is about the correct person
  • A credit score (credit rating)
  • All credit applications made in the last five years
  • 24 months of repayment history information, giving a breakdown of if you have paid your credit card, loans and utilities bills on time
  • A financial hardship reference (note), if you’ve agreed to a financial hardship arrangement with your lender
  • Defaults and court judgments ordering you to repay money owed to a lender

Lenders can report to a different credit reporting body, so each may have slightly different information, but each will essentially have a record of your credit history. You can access your credit report free of charge every three months from each of the main credit reporting bodies in Australia (Equifax, Experian & illion). Learn more about credit reports on CreditSmart.

How is your credit score calculated?

Your credit score is based on the information contained in your credit report, including;

  • All your open and closed loans and credit cards
  • All applications for credit you have made in the last five years
  • The types of credit you have applied for and the name of the lender
  • 24 months of repayment history showing if you have paid your credit card, loans and council rates on time
  • A financial hardship reference (note), if you’ve agreed to a financial hardship arrangement with your lender
  • Defaults and court judgments ordering you to repay money owed to a lender, or Local Council for unpaid rates

Your credit score at a glance

What can affect your credit score?

  • Applying for credit
  • Missing your minimum payments
  • HECs, HELP and ATO debt payments

Defaults and court judgments ordering you to repay money owed to a lender, or Local Council for unpaid rates  

What doesn’t affect your credit score

According to Credit Savvy, here are things that don’t affect your credit score:

  • Checking your credit score
  • Your income
  • Your rent,phone bills
  • Your savings, investments and assets
  • How much of your available credit you’re using

If you agree a hardship arrangement with your lender, and comply with the arrangement.

When and how to check your credit score

Checking your own credit score or credit report does not impact or leave any trace on your credit report. 

It is a good idea to check your credit score:

  • Before applying for credit: to check your credit score
  • For any suspicious activity: checking your credit score and report can help you identify any debts or applications for credit you didn’t make
  • To monitor your credit score allows you to catch any significant shifts which can alert you to errors or fraudulent activity early

As a CommBank customer, you can use Credit Savvy for free access to check your credit score. Credit Savvy gets your credit report  from Experian and you can view it in NetBank or the CommBank app.

Credit Savvy is part of the CommBank Group finding ways to help you monitor and maintain your financial wellbeing.

You can also access your credit report free of charge every three months directly  from each of the main credit reporting bodies in Australia (Equifax, Experian & illion). You can learn more about credit reports on CreditSmart

Length of Credit History: The longer your credit history, the better. Lenders like to see a long record of responsible credit use.

Credit Age: The average age of your credit accounts; older accounts can improve your score as they show a longer credit history.

How to improve your credit score

  • Pay your debts on time
  • Contact your lenders if you think you are going to struggle to meet your payments, or if you miss a payment
  • Check your credit report to make sure there is no incorrectly listed information on it
  • Speak to your Lender early as they will have ways to provide you alternative payment arrangements based on your situation. Agreeing to a financial hardship arrangement with your lender does not impact your credit score.

Find more tips to improve your credit score.

 


Related information

Things you should know

This article provides general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as personal financial product advice. The views expressed by contributors are their own and don’t necessarily reflect the views of CBA. As the information has been provided without considering your objectives, financial situation or needs, you should, before acting on this information, consider the relevant Product Disclosure Statement and Terms and Conditions, and whether the product is appropriate to your circumstances. You should also consider whether seeking independent professional legal, tax and financial advice is necessary. Every effort has been taken to ensure the information was correct as at the time of printing but it may be subject to change. No part of the editorial contents may be reproduced or copied in any form without the prior permission and acknowledgement of CBA.