Your credit score plays a crucial role in determining your eligibility for loans—whether it’s a home loan, car loan, or personal loan. For first-home buyers and anyone looking to secure financing, improving your credit score can mean better loan terms, lower interest rates, and higher chances of approval.
The good news? No matter where you’re starting from, you can take steps to improve your credit score and get mortgage-ready.
Here’s everything you need to know about how to improve your credit score in Australia, with actionable steps, examples, and tools to help you along the way.
What is a credit score, and why does it matter?
A credit score is a number between 0 and 1,200 that represents your creditworthiness. It’s calculated based on your credit history, including loans, credit cards, and repayment behavior.
In Australia, credit reporting agencies like Equifax, Experian, and Illion assess this information and assign you a score.
Lenders use your credit score to decide:
- Whether to approve your loan application
- How much they’re willing to lend you
- What interest rate you’ll pay
The higher your credit score, the lower the risk you pose to lenders—which often means better loan terms.
What impacts your credit score in Australia?
Understanding what affects your credit score is the first step to improving it. Here are the key factors:
- Repayment history: Late or missed repayments on loans, credit cards, or bills negatively impact your score.
- Credit inquiries: Multiple loan or credit applications in a short time frame can lower your score.
- Credit limits and utilization: High credit limits or maxing out your credit cards can signal financial stress.
- Length of credit history: A longer, positive credit history helps improve your score.
- Defaults or bankruptcies: Defaults, court judgments, or bankruptcies stay on your credit report for up to 5 years.
Improve your credit score using these 6 steps
Improving your credit score doesn’t happen overnight, but steady progress can deliver significant results. Here’s how you can boost your score:
1. Pay your bills on time
Your repayment history has the biggest impact on your credit score, so paying bills and loans on time is critical.
Actionable tip: Set up automatic payments or reminders to ensure you never miss a due date. Start with smaller bills like utilities, then focus on loans or credit cards.
Example: If you’ve missed two credit card payments, making consistent on-time payments for six months can show lenders you’re back on track.
2. Reduce your credit card balances
Lenders look at how much of your available credit you’re using (your credit utilization ratio). High balances can drag down your score.
Actionable tip: Aim to keep your credit card balance below 30% of your credit limit.
Example: If your credit card limit is $5,000, try to keep your balance below $1,500.
3. Limit new credit applications
Each time you apply for a loan or credit card, it leaves a hard inquiry on your credit report. Too many inquiries in a short period can lower your score and make lenders cautious.
Actionable tip: Avoid applying for multiple credit cards or loans at once. Only apply when you truly need credit.
4. Check your credit report for errors
Mistakes on your credit report can unfairly lower your score. Checking your report ensures that the information is accurate and up to date.
How to check your credit report: You can request a free credit report from agencies like Equifax, Experian, or Illion once every 12 months.
What to look for:
- Incorrect repayment history
- Unfamiliar accounts or inquiries
- Outdated defaults or bankruptcies
Actionable tip: If you spot an error, contact the credit reporting agency and the lender to have it corrected.
5. Consolidate and manage debt
If you have multiple loans or credit card balances, consolidating your debt can make repayments easier and help improve your credit score.
Actionable tip: Speak to a mortgage broker about consolidating debt into one manageable loan with a lower interest rate.
Example: Combining three credit card balances into one personal loan can simplify your repayments and reduce overall interest costs.
6. Maintain older accounts
The longer your positive credit history, the better for your score. Closing older accounts can shorten your credit history and lower your score.
Actionable tip: Keep old accounts open (provided there are no fees) to maintain a strong credit history.
Tools to help you improve your credit score
Improving your credit score requires consistent effort, but there are tools and services available to make the process easier:
- Credit monitoring tools
- Equifax, Experian, and Illion offer credit monitoring services to track your score and alert you to changes.
- Budgeting apps
- Apps like Pocketbook, Frollo, and MoneyBrilliant help you manage spending and savings to stay on top of repayments.
- Debt consolidation calculators
- Online calculators help you determine how much you can save by consolidating debts.
How a good credit score helps with loans
A higher credit score can make all the difference when applying for a loan/mortgage:
- Better interest rates: Borrowers with strong credit scores typically qualify for lower interest rates, saving thousands over the life of the loan.
- Higher approval chances: A good credit score reassures lenders you’re a low-risk borrower.
- Lower fees: Some lenders offer fee waivers for borrowers with excellent credit profiles.
Example: On a $400,000 home loan, a difference of 0.5% in interest due to a better credit score could save you over $50,000 in interest payments over 30 years.
Your next steps to a better credit score
If you’re preparing for a home loan or any other type of financing, now is the perfect time to start improving your credit score.
For tailored advice on managing debt, improving your finances, or securing the right loan, speak to a trusted mortgage broker.
