What Credit Score Do I Need for a Car Loan in Australia?

Your credit score is one of the first things a lender checks when you apply for a car loan. It gives them a quick snapshot of how reliably you have managed credit in the past. But there is no single "passing grade" — different lenders have different thresholds, and your credit score is just one piece of the puzzle. This guide explains how credit scores work in Australia, what scores different types of car loan lenders require and what you can do to improve yours.

Understanding Australian Credit Scores

Australia has three major credit reporting bureaus: Equifax (formerly Veda), Experian and illion (formerly Dun & Bradstreet). Each uses a slightly different scoring model, but the concepts are the same. The Equifax scale (0-1,200) is the most commonly referenced:

How Lenders Use Your Credit Score

Your credit score is used in two ways: first as an initial screen (many lenders have an automated cut-off below which applications are declined without further review), and then as a factor in risk-based pricing (your score influences the interest rate offered).

Under Australia's Comprehensive Credit Reporting (CCR) system, introduced fully in 2018, credit files now contain both positive and negative information. This means lenders can see:

• Positive data: On-time repayments, account opening/closing dates, credit limits, account types
• Negative data: Late payments (30+ days overdue), defaults ($150+ and 60+ days overdue), court judgments, bankruptcies
• Enquiry data: Every credit application creates a record, showing which lenders you have applied to and when

Minimum Requirements by Lender Type

Prime Lenders (Banks and Major Non-Banks)

Major banks like CBA, ANZ, Westpac and NAB, plus large non-bank lenders, generally require a credit score of 600 or above and a clean credit file (no defaults or judgments in the past 5 years). They offer the most competitive rates, typically 5-8% p.a. for car loans, and usually require minimal or no deposit.

Near-Prime Lenders

These lenders fill the gap between prime and specialist. They may accept scores in the 500-600 range and tolerate minor blemishes on your credit file (such as a small paid default or a few late payments). Rates are typically 8-12% p.a. and they may require a 10-20% deposit.

Specialist Lenders

Specialist or non-conforming lenders cater to borrowers with significant credit impairment. They can work with scores as low as 300-400 and accept applications from people with active defaults, judgments and even discharged bankruptcies. Rates range from 12-20% p.a. and deposits of 20-30% are common.

What Else Lenders Consider Beyond Your Score

Your credit score is just one factor. Lenders also assess:

• Income and employment: Stable, verifiable income is essential. Lenders prefer at least 6-12 months in the same job. Self-employed borrowers typically need 12-24 months of ABN registration and recent tax returns.
• Living expenses: Lenders analyse bank statements for spending patterns, including food delivery, subscriptions and gambling transactions.
• Existing debts: Current loans, credit cards and buy-now-pay-later commitments reduce your capacity for a new loan.
• The vehicle: Age, type, value and whether you are buying from a dealer or privately. Most lenders restrict the vehicle age to 10-12 years at the end of the loan term.
• Deposit: A larger deposit reduces the lender's risk and can offset a lower credit score.

How to Improve Your Credit Score

1. Pay every bill on time: Under CCR, on-time repayments are reported as positive data. Even utility bills and phone plans that report to credit bureaus contribute to your score. Set up direct debits to avoid accidental late payments.
2. Reduce credit card limits: High credit limits (even unused) can negatively affect your score and borrowing capacity. Call your card provider and ask for a limit reduction.
3. Close unused accounts: Old credit cards or store cards you no longer use can create unnecessary risk signals. Close them and confirm they show as "closed by consumer" on your credit file.
4. Limit credit applications: Each application creates a hard enquiry. Multiple enquiries in a short period suggest financial stress. Only apply when you are confident of approval, or use a broker who targets the right lender first time.
5. Check for errors: Obtain your free credit report and look for incorrect addresses, debts that are not yours, or defaults that have been paid but not updated. Dispute any errors with the credit bureau.
6. Pay down existing debts: Reducing your overall debt levels improves your debt-to-income ratio and signals responsible financial management.
7. Avoid buy-now-pay-later overuse: While BNPL services like Afterpay and Zip are not yet consistently reported to credit bureaus, lenders can see the transactions on your bank statements. Frequent BNPL use may raise concerns.