What Is a Bad Credit Score in Australia?
Your credit score is a number that represents your creditworthiness to lenders. In Australia, three agencies — Equifax, Experian, and Illion — maintain credit files and calculate scores using different models. This guide explains what the numbers mean, what causes a bad score, and what you can do about it.
How Credit Scores Work in Australia
In Australia, your credit score is calculated by one of three credit reporting agencies: Equifax, Experian, and Illion. Each uses a slightly different scoring model and scale, which is why your score may differ between agencies.
Your credit file contains information about your credit history — loans you have applied for, repayment history, defaults, court judgments, and insolvency events. Under Comprehensive Credit Reporting (CCR), introduced progressively since 2018, positive repayment data is also included, meaning on-time payments improve your score over time.
Credit Score Ranges: Equifax, Experian, and Illion
Equifax (formerly Veda) is the most commonly referenced agency by Australian lenders. Their scale runs from 0 to 1,200:
- Excellent: 833–1,200
- Very Good: 726–832
- Good: 622–725
- Average: 510–621
- Below Average: 0–509
Experian uses a scale of 0 to 1,000, while Illion uses 0 to 1,000. Ranges differ but the general principle is the same — higher is better.
What Causes a Bad Credit Score?
The most common causes of a low credit score in Australia include:
- Defaults: An overdue debt of $150 or more that is at least 60 days past due. Paid defaults remain for 5 years; unpaid defaults for 5 years from listing (removed even if unpaid after 5 years).
- Court judgments: Debts that have proceeded to legal action. These stay on your file for 5 years.
- Bankruptcy or debt agreements: Part IX or Part X debt agreements, or formal bankruptcy. These are the most severe credit events.
- Multiple credit enquiries: Applying for many credit products in a short period signals financial stress.
- Late repayments: Under CCR, late payments on existing loans are now recorded.
How Your Credit Score Affects Home Loan Applications
Major banks (ANZ, Commonwealth Bank, NAB, Westpac) use automated credit scoring as part of their assessment. Most have a minimum Equifax score threshold of approximately 550 to 650, below which applications are automatically declined. They also have policies around defaults, judgments, and bankruptcy that may result in decline regardless of score.
Specialist non-bank lenders (Pepper Money, Liberty Financial, Bluestone, La Trobe Financial, Resimac) conduct manual assessments and will consider applications with much lower scores — in some cases below 400. However, a lower score means higher interest rates and potentially lower maximum LVR.
Read our bad credit home loans page for specific information on what specialist lenders offer.
How to Check Your Credit Score for Free
You are entitled to access your credit report for free once per year from each of the three agencies:
- Equifax — request your free credit report
- Experian — free credit report request
- Illion — check your credit file
Reviewing your report before applying for a home loan is strongly recommended. Errors are more common than most people expect, and disputing an incorrect listing can significantly improve your score.
How to Improve a Bad Credit Score
- Pay all current obligations on time: Under CCR, on-time payments are recorded and improve your score over time.
- Pay outstanding defaults: While a paid default still appears on your file, it is viewed much more favourably than an unpaid one by specialist lenders.
- Reduce credit card limits: Even unused credit limits count against your borrowing capacity.
- Don't apply for new credit: Every application creates a hard enquiry. Avoid new credit applications for at least 6 months before applying for a home loan.
- Dispute errors: If you find incorrect information on your credit file, lodge a dispute with the relevant agency.
- Wait: Negative listings are automatically removed after 5 years (7 years for serious credit infringements). Time is on your side.
Frequently Asked Questions
What credit score do I need for a home loan in Australia?
Major banks generally prefer an Equifax score of 600 or above. Specialist lenders will consider scores as low as 300–400, but with higher rates and lower maximum LVR.
How long does it take to improve a bad credit score?
With consistent on-time repayments and no new negative events, you can see meaningful improvement in 6 to 12 months. Defaults are removed after 5 years.
Does checking my own credit score lower it?
No. Checking your own credit file is a "soft enquiry" and does not affect your score. Only formal credit applications create "hard enquiries" that can lower your score.