What is a good or bad credit score?

What is a credit score?

Your credit score is a number that represents your financial history. It indicates how likely you are to be accepted for credit. It’s based on your credit report, which is a record of how you’ve handled credit in the past.

We get yours from Experian, one of the three credit reporting bodies in Australia. This score ranges from 0-1,000.

Credit is when you borrow money with the agreement that you’ll pay it back later. Credit comes in many forms, including credit cards, personal loans, paying for something in monthly instalments (e.g. a new car or sofa), home loans and more.

What is a good or bad credit score?

There is no ‘magic’ credit score that will guarantee that you get accepted for credit. Also, different lenders are looking for different things, so you might get refused credit by one lender and accepted by another.

Remember, your credit score is a useful indication of your creditworthiness, but lenders will look at other factors (such as your income and debt levels) before deciding whether to lend to you.

The Experian score bands (and what we call them at ClearScore) are below:

What does a high credit score mean?

Lenders tend to look at your credit score when you apply for credit, such as a credit card. They’re looking for someone who will be able to meet the repayments; someone who is low risk.

A higher credit score means your credit report contains information that shows you’re low risk, so you’re more likely to appeal to lenders. For example, if your report shows that you always pay your bills on time, you’ll be considered a reliable borrower.

If you have a high credit score, your application is more likely to be accepted. You’re also more likely to be offered the best interest rates and higher credit limits.

What does it mean if your score is low?

A lower credit score means you might be seen as a high risk borrower. For example, if your credit report shows that you’ve defaulted on a previous debt, your credit score is likely to be lower.

If you have a lower score, lenders might offer you credit at a higher interest rate or reject your credit application altogether. But don't worry, there are plenty of steps you can take to improve your score.

Check your credit score before applying: Whenever you take out credit, it’s worth checking your score first.

Who calculates your credit score?

Your credit score is calculated by a credit reporting body. There are three credit reporting bodies in Australia: Experian, Equifax and illion. ClearScore is not a credit reporting body. We show you your Experian credit score, which ranges from 0 to 1,000.

Each credit reporting body is sent information by lenders about the credit you have and how you manage it. Other information, such as public records like bankruptcy data are also sent to the credit reporting agencies and form part of your credit report. Once a credit reporting body has enough information on you, they will generate your credit report and calculate your credit score.

What kinds of factors could harm your credit score?

There are a number of factors that can negatively impact your credit score.