What is credit rating?

A credit rating in Australia, more correctly called a credit score, is a numerical measure of a person's creditworthiness based on their borrowing and repayment history. Lenders use credit scores to decide whether to approve loans, set interest rates, and determine credit limits. Higher scores indicate lower risk to the lender.

Three main credit reporting bodies operate in Australia: Equifax (formerly Veda), illion, and Experian. Each maintains a separate file on individual consumers, drawing on data supplied by lenders, telecommunications companies, and utility providers. Credit scores are generated on different scales by each provider: Equifax uses 0 to 1,200, illion 0 to 1,000, and Experian 0 to 1,000. A score above 800 (Equifax) or 700 (illion and Experian) is generally considered very good to excellent.

Comprehensive Credit Reporting (CCR), introduced from 2014 and made mandatory for the major banks in 2020, expanded the data captured. Credit files now include not just defaults and bankruptcies but also positive information such as on-time repayments, account opening and closing dates, and credit limits. CCR has made Australian credit scoring more like that in the United States and has improved access to credit for consumers with thin or older default-only files.

Australians can check their credit score and credit report for free once a year from each provider, more often if they have been refused credit or believe they are victims of identity theft. Many banks and budgeting apps now show credit scores within their own platforms. To improve a score, the standard advice is to pay all bills on time (utility and phone bills now count), avoid opening multiple new credit products in quick succession, keep credit card limits modest, and address any defaults by agreeing repayment plans with creditors. Errors on a credit file can be disputed directly with the credit reporting body, with complaints escalated to the Australian Financial Complaints Authority (AFCA) if not resolved.