What affects your credit score in Australia (good and bad)?

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Factors that affect your credit score





















Your credit score can have a major impact on your future financial plans. Buying a home or car and even clearing your existing debt can all be harder to do if you have a bad credit score.

On the flip side, if you have a good credit score, these things can become more straightforward.

But what actually impacts your credit score? Here are 10 factors to watch out for.

1. Your repayment history

  • Good: Consistently paying bills and making credit payments on time.
  • Bad: Being late to pay bills or not paying back credit.

“It sounds simple, but paying your bills on time is one of the most powerful things consumers can do to improve their credit score,” Mel Cochrane, Group Managing Director of Equifax ANZ told Money.com.au.

“Under the comprehensive credit reporting (CCR) system, 'good credit behaviour', like making monthly payments on time, is recorded as a positive on your credit report,” she said.

Bill payments, like utilities and phone plans, as well as other credit products like a mortgage, credit cards, personal loans or auto loans, can all affect your credit score.

“If you cannot pay, be sure to talk to your lender as soon as possible and see what arrangements can be made,” Cochrane added.

On the flip side, late and missed payments (called ‘defaults') have a negative impact on your credit score.

Late versus missed payments (defaults)

Late paymentDefault

A payment (of any value) that is more than 14 days late

A payment of $150 or more that’s more than 60 days overdue

Stays on your credit report for 2 years

Stays on your credit report for 5 years

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2. New credit applications

  • Good: Only applying for credit when really necessary and avoiding applications with multiple providers.
  • Bad: Large numbers of applications in a short amount of time.

“One of the biggest things to be careful of when applying for credit is making multiple applications,” Cochrane warned.

“Many credit applications in a short space of time can impact your credit score as it could look like you are in credit stress, whether that’s truly the case or not. Depending on the type of credit application, multiple enquiries can have a negative impact.”

Credit enquiries stay on your credit report for five years.

type of loan affects credit score

3. Type of credit accounts you have

  • Good: Secured loans (e.g. a home loan or car loan) you are able to repay consistently.
  • Bad: Unsecured short-term credit.

“Try to limit the number of short-term unsecured loans you have, as too many may be an indicator of financial stress and negatively impact your score,” Cochrane said.

As well as the likes of ‘payday loans’, applications and missed payments on buy now, pay later accounts are often of particular interest to lenders looking at your credit record.

However, a recent Money.com.au study found over a third of Australian consumers didn't think a missed BNPL payment affects their credit score.

4. How many credit accounts you have

  • Good: Only having credit accounts open if you rely on and use them.
  • Bad: Having more credit accounts than you need.

Your credit report will show all of the credit accounts you’ve held in the last two years. Having too many open accounts can be a problem.

For example, it’s not uncommon for people to accumulate multiple credit cards over time.

“It’s best to close any credit card accounts that are not of use anymore," Cochrane said.

“This will provide an indicator to lenders of your capacity to pay back any new credit you apply for.”

Credit limits on credit cards

5. Credit limits

  • Good: Keeping credit limits low (and reducing existing ones if necessary).
  • Bad: High credit card limits, particularly if they’re not needed.

Having credit cards with high limits will not only impact your capacity to borrow money in future, it will also show up in your credit report.

Reducing credit limits sends a positive signal to lenders about your financial situation and could help your credit score.

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6. Bills going to the wrong address

  • Good: Keeping your current address up to date with credit and service providers.
  • Bad: Moving home but not telling companies that send bills to you.

One thing that won’t be shown on your credit report is why you missed a payment.

If a bill is late or goes unpaid because it was sent to your old address, this will go on your credit report just like any other missed payment.

7. Changing jobs and address

  • Good: Showing consistency in where you live and are employed.
  • Bad: Changing either frequently.

If you haven’t noticed by now, consistency is important in maintaining a good credit score.

This is true of how you manage your finances, but also of other key aspects of your life.

"Moving jobs and residence frequently can be an indicator of financial stress, while showing permanence in one or both can help improve your score," Cochrane explained.

Naturally, in a lot of cases these things can be out of your control. But avoiding unnecessary change where you can could be seen as a positive.

Joint accounts affect credit score

8. Joint accounts

  • Good: Only sharing accounts with people you can rely on.
  • Bad: Not splitting up joint accounts following a break up.

Your credit report will always be specific to you. But if you have shared accounts, your trustworthiness as a borrower could be impacted by the other person.

Particularly if they are responsible for making the payments.

For example, if your partner usually pays certain bills but ends up missing a payment, your credit score could be damaged.

Court judgments affect credit score

9. Court judgments

  • Good: Goes without saying, but avoiding these is preferable.
  • Bad: Bankruptcy or any court-enforced or legally-binding debt agreement.

Any court decisions against you in relation to your debt will be shown on your credit report and will affect your credit score.

Current court judgments, bankruptcy, and debt agreements are among the factors affecting your credit score that will automatically make it extremely difficult to access credit.

There are, however, some specialist lenders who offer loans for discharged bankrupts.

Credit score improve over time

10. Time

  • Good: Being patient and allowing your credit score to build gradually.
  • Bad: Applying for credit before your score has had time to recover.

In most cases, if you manage your finances well, your credit score will improve over time.

As we’ve covered, simply paying your bills on time consistently and not applying for too much credit, should help grow your credit score gradually.

What does NOT impact your credit score?

Examples of factors that generally do not affect your credit score include:

  • Checking your own credit score
  • HECS-HELP and FEE-HELP student loans (unlike commercial education loans which could have an impact)
  • How much you have in savings
  • Your income
  • The interest rate on your loan or credit card
  • Your relationship status or gender

There's more of a grey area around whether or not a credit enquiry will impact your credit score. In short, it depends on the type of inquiry and the lender.

Cochrane said consumers should ask the lender for clarification re how an inquiry will be treated.

“In some cases, such as pre-qualification enquiries, lenders might look at your credit score without leaving a footprint on your credit file,” she said.

"However, if the application will leave an impact on your credit file, consumers should be more circumspect. In these cases it’s ok to shop around for the best loan you can find, but only apply when you receive a truly great offer.”

Written by

Sean Callery Editor Money.com.au


Sean Callery

Reviewed by

Shaun McGowan Money.com.au founder

Loans Expert

Shaun McGowan