How to Improve Your Credit Score in Australia: 10 Proven Tips

Your credit score is one of the most important factors lenders consider when assessing your loan application. A higher credit score can unlock better interest rates, higher borrowing limits, and faster approvals. A lower score can mean higher rates, smaller loan amounts, or outright rejection. In Australia, understanding how your credit score works and taking deliberate steps to improve it can save you thousands of dollars over the life of your loans. This guide explains how credit scoring works in Australia and provides 10 proven, actionable tips to improve your score.

Understanding Credit Scores in Australia

In Australia, credit scores are maintained by three main credit reporting bureaus: Equifax (formerly Veda), Experian, and Illion. Each bureau uses a slightly different scoring model, but they all assess similar factors and produce a score that reflects your creditworthiness. Equifax scores range from 0 to 1,200, with scores above 622 considered "good" and scores above 726 considered "very good" or "excellent." Experian scores range from 0 to 1,000, and Illion scores range from 0 to 1,000. Since the introduction of Comprehensive Credit Reporting (CCR) in Australia, your credit file now includes positive information (such as on-time repayment history) in addition to negative information (such as defaults and late payments). This means your everyday financial behaviour now actively contributes to building your score.

Tip 1: Check Your Credit Report for Errors

The single most impactful action you can take is to obtain a free copy of your credit report from each of the three bureaus and check it for errors. Studies consistently show that a significant percentage of credit reports contain inaccuracies that can drag down your score. Common errors include incorrect personal details (wrong address, misspelt name), accounts listed that do not belong to you, defaults that have been paid but not updated, duplicate entries for the same debt, and hard enquiries from applications you did not make. If you find an error, you have the right to dispute it with the bureau and the credit provider. Under the Privacy Act, they must investigate and correct verified errors within 30 days. Correcting a wrongly listed default can add hundreds of points to your score overnight.

Tip 2: Pay All Bills on Time, Every Time

Under Comprehensive Credit Reporting, your repayment history is now the single most influential factor in your credit score. Each month, lenders report whether you made your repayment on time, and this creates a two-year rolling history on your credit file. Even one late payment can remain on your file for two years and impact your score. Set up direct debits or calendar reminders to ensure every loan repayment, credit card minimum payment, and utility bill is paid by the due date. If you are struggling to make a payment, contact the lender before the due date to arrange a hardship variation — this is better than defaulting.

Tip 3: Reduce Your Credit Card Limits

Lenders assess your total available credit when evaluating your borrowing capacity, not just the amount you have spent. If you have a credit card with a $20,000 limit but only use $2,000, lenders still count the full $20,000 as a potential liability. Reducing your credit card limit to an amount you actually need serves two purposes: it reduces the perceived risk on your credit file, and it improves your borrowing capacity for future loans. If you have multiple credit cards, consider closing the ones you do not use.

Tip 4: Limit Credit Applications

Every time you apply for credit (a loan, credit card, or even some buy-now-pay-later products), the lender makes a hard enquiry on your credit file. Multiple hard enquiries in a short period signal to lenders that you may be in financial distress or shopping around excessively, both of which are negative signals. As a general rule, avoid making more than two credit applications within a six-month period. If you are comparing loan options, use a broker who can submit one application and compare across multiple lenders, rather than making individual applications to each lender yourself.

Tip 5: Pay Down Existing Debt

Reducing your overall debt level improves both your credit score and your borrowing capacity. Focus on paying off high-interest debts first (such as credit cards and personal loans), then work on lower-interest debts. If you have multiple debts, the avalanche method (paying the highest interest rate first) minimises total interest paid, while the snowball method (paying the smallest balance first) provides psychological momentum. Choose whichever method you are more likely to stick with.

Tip 6: Maintain a Long Credit History

The length of your credit history matters. Older accounts in good standing contribute positively to your score. Avoid closing your oldest credit account unless there is a compelling reason to do so, as this can shorten your average credit history and reduce your score. If you are young or new to credit, consider starting with a low-limit credit card or a small personal loan and managing it responsibly. Building a track record of on-time repayments over 12 to 24 months will establish a positive credit history.

Tip 7: Diversify Your Credit Mix

Having a mix of credit types (such as a mortgage, a car loan, and a credit card) can have a modest positive impact on your score, as it demonstrates your ability to manage different types of credit responsibly. However, do not take on credit you do not need solely to diversify your file — the benefit is marginal.

Tip 8: Avoid Defaults at All Costs

A default is the most damaging event that can appear on your credit file. It occurs when a payment is overdue by 60 days or more and the amount is $150 or more. A default remains on your credit file for five years (seven years for a clearout, which is a default that has been settled for less than the amount owed) and can reduce your score by 200 to 350 points. If you are struggling to make payments, contact the lender immediately and ask about hardship provisions. Lenders are required by law to consider genuine hardship applications. A hardship arrangement will not appear as a default on your credit file.

Tip 9: Be Cautious with Buy Now Pay Later

Buy Now Pay Later (BNPL) services such as Afterpay, Zip, and Humm are now reported to credit bureaus in many cases. Missed BNPL payments can negatively affect your credit score, and having active BNPL accounts can reduce your borrowing capacity when applying for a loan. If you use BNPL services, ensure you always make payments on time and close any accounts you are not actively using. Some mortgage lenders specifically look for BNPL usage as an indicator of financial stress.

Tip 10: Be Patient and Consistent

Improving your credit score takes time. Negative events gradually have less impact as they age, and positive behaviour (on-time repayments, low credit utilisation) compounds over time. Most borrowers can see meaningful improvement within 6 to 12 months of adopting the strategies above. If you have a significant negative event on your file (such as a default or a bankruptcy), the best strategy is to demonstrate consistent positive behaviour from that point forward while waiting for the event to age off your file.

What Score Do You Need?

The score required depends on the type of loan and the lender. Prime lenders (major banks and mainstream lenders) typically require a score above 600 to 650. Specialist lenders work with borrowers who have lower scores, though they charge higher rates to compensate for the increased risk. For the best interest rates, aim for a score above 700 (Equifax scale). Each improvement tier can unlock better rate offers, so even small improvements are worth pursuing. If you are unsure where your credit stands or how it will affect your loan application, our team can assess your situation and recommend the best path forward.