Your credit score is one of the first things a lender checks when you apply for a home loan. A strong score can mean faster approvals, better interest rates, and more borrowing power. A weak one can mean rejection — or being stuck with a higher rate that costs you tens of thousands over the life of your loan. The good news is that under Australia's Comprehensive Credit Reporting system, there are concrete steps you can take to improve your score, and some of them can show results within weeks.
What Is a Credit Score and Why Does It Matter?
In Australia, your credit score is a number between 0 and 1,200 (Equifax scale) or 0 and 1,000 (Experian/illion) that summarises your credit history. Lenders use it as a quick indicator of how risky you are as a borrower.
Credit Score Ranges (Equifax)
| Score Range | Rating | What It Means for Home Loans |
|---|---|---|
| 833–1,200 | Excellent | Best rates, fastest approvals |
| 726–832 | Very Good | Competitive rates, strong position |
| 622–725 | Good | Most lenders will approve |
| 510–621 | Average | Some lenders may decline or charge more |
| 0–509 | Below Average | Limited options, specialist lenders only |
Since the introduction of Comprehensive Credit Reporting (CCR), your report now includes positive data — not just negatives. Every on-time payment on your credit card, phone bill, or personal loan is recorded and works in your favour. This means you can actively build a better score, not just avoid damaging it.
What Affects Your Credit Score?
Understanding what goes into your score is the first step to improving it. Here are the key factors:
Key Factors in Your Credit Score
| Factor | Impact | How Long It Stays |
|---|---|---|
| Repayment history | High | 2 years |
| Defaults ($150+, 60+ days overdue) | High | 5 years |
| Credit enquiries (applications) | Medium | 5 years |
| Credit account types & limits | Medium | While account is open |
| Age of credit history | Medium | Ongoing |
| Court judgments / bankruptcies | Severe | 5–7 years |
8 Steps to Improve Your Credit Score
1. Check Your Credit Report for Errors
This is the single fastest way to potentially boost your score. You're entitled to a free credit report every three months from each of Australia's three credit reporting agencies: Equifax, Experian, and illion.
Common errors to look for include:
- Incorrect personal details (name, date of birth, address)
- Duplicate debt listings
- Accounts that don't belong to you
- Late payments that were actually paid on time
- Closed accounts still showing as open
- Wrong debt amounts
If you find an error, contact the credit provider first. If they don't resolve it within 30 days, you can escalate to the Australian Financial Complaints Authority (AFCA) for free.
2. Pay Every Bill on Time — Especially the Small Ones
Under Comprehensive Credit Reporting, your on-time payments are now recorded as positive data. This includes credit cards, personal loans, phone bills, utilities, and even Buy Now Pay Later accounts. Set up direct debits or calendar reminders to ensure nothing slips through.
What Counts as a Late Payment?
A late payment is recorded when your minimum repayment is more than 14 days past due. A single late payment is unlikely to cause major damage, but a pattern of late payments signals financial stress to lenders. Late payment records stay on your report for 2 years.
3. Reduce Your Credit Card Limits
Lenders assess your borrowing power based on your total available credit — not just what you've spent. A credit card with a $20,000 limit counts as $20,000 of potential debt, even if you only use $2,000 of it. Reducing your limits (or closing cards you don't use) can immediately improve how lenders view your application.
4. Pay Down Existing Debt
Reducing your outstanding balances improves your credit utilisation ratio — the percentage of your available credit you're actually using. As a general rule, aim to keep your credit card balances below 30% of the limit. If you have multiple debts, consider consolidating them into a single loan to simplify repayments and reduce the risk of missed payments.
5. Stop Applying for Credit You Don't Need
Every time you apply for a credit card, personal loan, car loan, or even some Buy Now Pay Later services, a "hard enquiry" is recorded on your credit report. Multiple enquiries in a short period make you look desperate for credit. Space out any applications and only apply when you're serious.
How Many Enquiries Is Too Many?
There's no hard rule, but more than 2-3 credit applications within 6 months can raise red flags with lenders. Each enquiry stays on your report for 5 years, though the impact on your score diminishes over time. If you're shopping around for a mortgage, use a broker — we submit one application to the right lender, rather than you applying to several banks yourself.
6. Keep Old Accounts Open
The length of your credit history matters. An old credit card that you've managed well for years is a positive signal to lenders. If you close it, that history becomes less influential. Keep your oldest accounts open (even if you rarely use them), as long as the fees are manageable.
7. Resolve Any Defaults Before Applying
A default — a debt of $150 or more that's 60+ days overdue — is one of the most damaging marks on your credit report. It stays for 5 years from the date it was listed, and paying it off will not remove it. However, a "paid default" looks significantly better than an unpaid one, so clearing any outstanding defaults before applying for a home loan is essential.
If a default was listed incorrectly, you have the right to dispute it with the credit provider at no cost. If the provider doesn't resolve it, escalate to AFCA.
8. Avoid Credit Repair Scams
ASIC's Moneysmart warns that you don't need to pay a credit repair company to fix errors on your report — you can do it yourself for free. If you do engage a company, check they're licensed on ASIC's Professional Registers under "Credit Licensee" or "Credit Representative". Be wary of anyone promising to remove accurate negative information, as this is not legally possible.
How Long Does It Take to Improve Your Score?
The timeline depends on your starting point:
Realistic Improvement Timelines
| Action | Potential Impact | Timeline |
|---|---|---|
| Fix errors on credit report | Immediate–30 days | Once corrected by agency |
| Reduce credit card limits | 1–2 months | Next reporting cycle |
| Build positive payment history | 3–6 months | Cumulative improvement |
| Wait for old enquiries to age | 6–12 months | Declining impact over time |
| Wait for defaults to expire | Up to 5 years | From date of listing |
If you're planning to apply for a home loan in the next 3-6 months, start with the quick wins: check your report for errors, reduce unused credit limits, and make sure every bill is on direct debit. These steps alone can make a meaningful difference.
The Bottom Line
Your credit score isn't a fixed number — it's a living snapshot of your credit behaviour. Under Comprehensive Credit Reporting, every on-time payment counts in your favour, and fixing errors can produce quick results. The key is to start early: ideally 3-6 months before you plan to apply for a mortgage. Check your report, clean up any issues, and build a track record of responsible credit use. When it's time to apply, you'll be in the strongest possible position.
Sources: Equifax Australia; Moneysmart (ASIC); CreditSmart; Canstar
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