Whether or not you have a good credit score could mean the difference between borrowing the amount you want on a competitive interest rate and not being approved at all.
That’s why it’s important to understand what a good credit score is, and how you can work towards achieving – or retaining – one.
In Australia, there are two major credit reporting bureaus: Experian and Equifax.
Both Experian and Equifax have a credit scoring system that’s divided into five tiers:
- Excellent
- Very good
- Good
- Fair
- Poor/Below average
Borrowers with an Australian credit history will have a credit score that sits within one of these tiers, based on their past credit behaviour – whether good or bad.
The main difference between Experian and Equifax is that they follow slightly varied credit score scales. Equifax grades credit history between 0 and 1200, while Experian grades it between 0 and 1000.
This means that a “perfect score” is 1000 as reported by Experian, and 1200 as reported by Equifax.
| Credit score tiers | Experian | Equifax |
| Excellent | 800 – 1000 | 833 – 1200 |
| Very good | 700 – 799 | 726 – 832 |
| Good | 625 – 699 | 622 – 725 |
| Fair | 550 – 624 | 510 – 621 |
| Poor/Below average | 0 – 549 | 0 – 509 |
Source: Experian.com.au, Equifax.com.au.
Despite the variance in scales, and the likelihood that your numeric score will differ between the two credit bureaus, you will tend to find that your score generally sits within the same tier across both.
So, the question remains – what is a good credit score?
As the tiers suggest, an Experian credit score between 625 and 699, and an Equifax credit score between 622 and 725, is technically considered to be “good”. Anything above this is even better.
Lenders will favour the borrowers with the highest credit scores. This means that someone with a “good” credit score likely won’t be offered an interest rate as competitive as one they may offer a borrower who has a “very good” or “excellent” credit score.
What determines my credit score?
Credit scores are calculated based on both the positive and negative credit behaviours that are recorded on your credit history. Some of the factors that may be taken into consideration include:
- Existing debts and the amount owing
- Existing credit cards and their credit limit
- Applications for credit products
- Repayment behaviours
- Late payments and defaults
How can I improve my credit score?
It’s always a good idea, for the sake of your financial wellbeing, to strive for an excellent credit score.
Whether you already have an excellent credit score that you want to ensure you retain, or you’d like to work on improving your score, there are actions you can make that just may have a positive impact.
Here are a few to get you started:
Regularly check your credit history
It’s worth getting into the habit of regularly checking your credit history. One of the reasons for this is that inaccuracies can occur, but you won’t be able to have them corrected if you don’t know they’re there. RateCity’s credit score hub makes it easy for you to check both your Experian and Equifax credit scores at once.
Ensure you pay your bills on time
Consider setting up a recurring reminder on your phone, or an automatic payment transfer through online banking, to ensure your credit card or loan repayments are made ahead of the due date. This will help you avoid relying on your memory alone to pay your bills on time.
Pay off existing debts
Focusing on paying down your existing debts before applying for more credit can help you demonstrate that you’re a responsible borrower.
