Most Australians don't think about their credit score until a lender does. And by that point, whatever is sitting on your file has already shaped the answer.
A strong score opens the door to competitive rates, more lender options and smoother approvals. A weak one narrows your choices, pushes up the interest rate and can stop an application cold. The difference between 6.2% and 9% on a $500,000 loan over 30 years is roughly $250,000 in total interest. That is not a rounding error. That is a house deposit.
This guide covers how Australian credit scores work, what lenders actually look at (it is not just the number), and what to do if your score is lower than you need it to be. If you already know your credit position and want to compare loan pathways, head to our home loans page or use the form below to speak with a specialist.
How credit scores work in Australia
Australia has two main credit reporting bureaus: Equifax (the largest, and the one most mortgage lenders check) and Experian (which now incorporates Illion's data). Each bureau calculates its own score using its own model, so you can have different numbers across bureaus at the same time. That is normal.
Equifax uses a 0 to 1,200 scale. Experian uses 0 to 1,000. For home loan applications, Equifax is the score that matters most, because the big four banks and most major lenders use it as their primary check.
Your score is a probability estimate. It predicts how likely you are to repay based on your past credit behaviour. It is not a judgement about your character or your income. It is a data-driven risk rating. And since Australia moved to Comprehensive Credit Reporting (CCR) from 2018, your score now reflects both good and bad behaviour, not just the negatives.
What changed with Comprehensive Credit Reporting
Before CCR, your credit file was basically a rap sheet. It recorded the bad stuff: defaults, late payments, credit applications, bankruptcy. If you had always paid on time, there was no positive record of that behaviour. You were invisible in the best-case scenario.
Under CCR, your file now includes 24 months of repayment history across credit accounts, the types of accounts you hold and their limits, and when accounts were opened and closed. Consistent on-time payments build your score. Missed payments hurt it. The system rewards discipline over time, which is good news for borrowers who have always done the right thing but had no way to prove it.
What credit score do Australian lenders want?
No lender publishes a hard minimum score on their website. But in practice, the thresholds are well understood across the industry. Here is what different types of lenders typically look for on the Equifax scale.
| Equifax score band | Range | What it means for home loan applications |
|---|---|---|
| Excellent | 853 to 1,200 | Best rates, easiest approvals, strongest negotiating position. Widest lender choice available. |
| Very Good | 735 to 852 | Access to competitive home loan rates from most lenders. This is where you want to be before applying. |
| Good | 661 to 734 | Meets the practical minimum for most major banks. May not qualify for the sharpest rates. |
| Average | 460 to 660 | Most major banks become harder to access. Tier-two banks and credit unions may consider 600+. Rate premiums likely. |
| Below Average | 0 to 459 | Standard lenders are unlikely to approve. Specialist non-bank or private lenders may consider the application at significantly higher rates and deposit requirements. |
Source: Equifax Australia. Score bands are Equifax's published ranges. Lender thresholds are industry guidance and may vary by lender, product and individual circumstances.
The score by lender type
In practice, the lender landscape breaks down roughly like this:
Generally want 661+ with no active defaults. A score of 680+ with a clean file gives you a strong position. Active defaults often trigger automatic decline rules regardless of the score number.
Some will consider scores from 600 to 660, particularly with a strong deposit and stable employment. Lender policy varies significantly in this range, so lender selection matters more than usual.
More flexible on credit history. Some accept scores from 500 to 550 but at rates typically 1 to 3% higher than mainstream. They look more closely at recent behaviour than old marks on your file.
Will consider scores below 500, active defaults and prior bankruptcy. Rates are significantly higher (often 8 to 12%+), deposits of 20 to 30% are common, and terms are usually shorter. Many borrowers use these as a bridge while they rebuild their credit profile. For more on this pathway, see our bad credit refinancing guide.
One number to remember: defaults trump scores
Here is something that catches people off guard. An active default on your credit file can be a harder barrier than a low score. Some major banks have automatic decline rules that trigger the moment an active default appears, regardless of whether your overall score is 700 or 500. A score of 680 with a clean file gets you further than a score of 720 with a default sitting on it. The specific entries on your report matter as much as the headline number, sometimes more.
What's on your credit report
Your credit score is calculated from your credit report. Think of the score as the summary grade and the report as the full exam paper. Lenders look at both. Under Comprehensive Credit Reporting, your report now includes:
| What's recorded | How long it stays | Impact on home loan applications |
|---|---|---|
| Credit enquiries | 5 years | Multiple applications in a short period signal risk. Lenders wonder why you are applying in several places at once. |
| Repayment history (CCR) | 24 months | Monthly records of whether you paid on time. Consistent on-time payments build your score. This is the biggest positive factor under CCR. |
| Account types and limits | While open, plus 2 years after closure | Credit card limits count as potential debt even if the balance is zero. A $15,000 card you never use still affects borrowing capacity. |
| Defaults | 5 years | Listed when a payment is 60+ days overdue and the amount is $150 or more. Can trigger automatic decline at major banks regardless of score. |
| Serious credit infringements | 7 years | Listed when a creditor cannot contact you about an overdue debt. Extremely damaging to applications. |
| Court judgements | 5 years | Any court-ordered debt creates a significant red flag for lenders. |
| Bankruptcy | 5 years from date, or 2 years from discharge (whichever is later) | Most mainstream lenders will not consider you during bankruptcy or for a period after discharge. Specialist lenders may. |
One thing your credit report does not show: your income, your savings balance or your employment details. Lenders get that information separately. The credit report tells them how you have handled debt. Your application tells them whether you can handle the new debt you are asking for.
What kills your credit score before you apply
Most credit score damage is self-inflicted and avoidable. The frustrating part is that many borrowers only discover the problem when a lender says no. Here are the most common score killers and how to sidestep them.
Multiple credit applications in a short period
Every time you formally apply for credit (a home loan, car finance, credit card, even some phone plans), a hard enquiry hits your file. A few in quick succession tells lenders you are either desperate or shopping recklessly. Space applications out and avoid applying with multiple lenders simultaneously unless your broker is managing it.
Let a broker submit strategically, not scattergun.
Keeping credit cards you don't use
That $10,000 limit card sitting in your wallet with a zero balance? Lenders treat the full limit as a potential liability. It reduces your borrowing capacity and can indirectly affect your score. Close unused cards before applying for a home loan, and give it a few weeks for the closure to reflect on your file.
Close unused cards at least 30 days before your application.
Buy now pay later accounts
Since June 2025, BNPL providers like Afterpay and Zip are regulated under the National Credit Act. They hold Australian Credit Licences and report to credit bureaus. Active BNPL accounts now appear on your file, and missed payments affect your score. Lenders also factor BNPL facilities into your borrowing capacity assessment, much like credit cards.
Clear BNPL balances and close accounts before applying.
Late payments on anything
Under CCR, your repayment history across all credit accounts is recorded monthly for the past 24 months. A single missed payment on a $50 phone bill or a $200 car finance instalment shows up and can drop your score noticeably. Lenders see it and draw conclusions about how you manage obligations. Set up direct debits for every recurring payment.
Automate every payment. One missed bill can cost thousands in higher interest.
Not checking your file before applying
Around 14% of Australian adults have a Below Average credit score. Some of those people have errors on their file they don't even know about: incorrect default listings, wrong personal details, enquiries they never made. Finding these before applying gives you time to dispute them. Finding them after the lender declines you does not.
Check all your credit reports 3 to 6 months before applying.
Ignoring old defaults or disputed debts
A default listed in breach of the Privacy Act 1988 (for example, without the required notice or with an incorrect amount) may be removable. If you have defaults on your file, check whether they were listed correctly. Incorrectly listed defaults can sometimes be removed, which may lift your score significantly.
Review defaults for accuracy. Incorrectly listed ones may be removable.
How to check and improve your credit score
The single best thing you can do before applying for a home loan is check your credit report. Not one of them. All of them. Because different lenders report to different bureaus, and an error on one file may not appear on another.
How to check your score for free
Under the Privacy Act 1988, you can request a free copy of your credit report from each bureau every three months. Checking your own score is a soft enquiry and does not affect your score. There is no reason not to do this.
How to improve your credit score
If your score is lower than you need, there is no instant fix. Credit repair takes time. But the right actions start compounding within months, and most people see meaningful improvement within six to 12 months of consistent good behaviour.
What helps
- Pay every bill and instalment on time, every time. Set up direct debits.
- Close unused credit cards and reduce limits on cards you keep.
- Clear BNPL balances and close accounts you no longer need.
- Keep credit utilisation low. Aim for under 30% of your limit.
- Avoid applying for new credit in the 6 months before a home loan application.
- Dispute any errors you find on your report promptly.
What hurts
- Late or missed payments on any credit account, even small amounts.
- Multiple credit applications in a short period (hard enquiries).
- High credit card balances relative to limits.
- Defaults, judgements, bankruptcy or serious credit infringements.
- Keeping old credit cards open with high unused limits.
- Ignoring overdue accounts until they become defaults.
Bad credit home loan options
A low credit score does not automatically mean the answer is no. It means the answer is different. The lender pool shrinks, the rates go up and the deposit requirements get heavier, but pathways exist. The right approach depends on how bad the damage is, how old it is, and what your overall financial position looks like today.
Non-bank lenders
Non-bank lenders operate outside the big four and often have more flexible credit policies. They may accept scores in the 500 to 600 range and look more favourably at recent behaviour than old marks on your file. Rates are higher than mainstream (typically 1 to 3% above standard) but significantly lower than private lending. If your score is Average band and the issues are older, this is often the best starting point.
Specialist lenders
For borrowers with active defaults, discharged bankruptcy or multiple credit issues, specialist lenders assess the full picture rather than relying on a score cutoff. Expect rates of 8 to 12%+ and deposit requirements of 20 to 30%. These loans work best as a short-term solution. Get in, stabilise, then refinance to a mainstream lender once the credit file cleans up, typically 12 to 24 months later.
Wait and rebuild
Sometimes the most cost-effective option is patience. If your credit issues are recent (within the last 12 months), rebuilding your score by paying everything on time, reducing limits and avoiding new credit can move you from Average band to Good band within six to 12 months. The interest savings over a 30-year loan usually outweigh the cost of waiting.
Guarantor structure
A guarantor home loan uses a family member's property as additional security. This can help with deposit shortfalls but does not bypass credit assessment. The borrower still needs an acceptable credit history with most lenders, and the guarantor needs independent legal and financial advice. It addresses the security problem, not necessarily the credit problem.
Low doc pathways
If your credit issues overlap with non-standard income (common for self-employed borrowers), low doc lenders that also have flexible credit policies may be the right fit. These lenders look at your overall capacity, including bank statements and BAS, rather than relying solely on the credit score. Deposits of 20%+ are typical.
Important: rate difference adds up fast
A 2% rate premium on a $500,000 loan adds roughly $200 per week to your repayments and about $200,000 in total interest over 30 years. If you can improve your score before applying, even by one band, the savings over the life of the loan are substantial. Rushing into a high-rate loan when waiting six months could save you hundreds of thousands is a decision worth making carefully.
When should you get finance help?
The short answer: before you apply. The cost of applying with the wrong lender when you have credit issues is not just a declined application. It is another hard enquiry on your file, which makes the next application harder. A finance specialist can review your credit position, identify which lenders are likely to approve your profile, and structure the application to give it the best chance. That matters even more if any of these apply:
Getting the right advice before you apply prevents wasted applications, protects your file from unnecessary enquiries, and matches you with a lender that actually suits your credit profile. That single step can save you months and tens of thousands of dollars.
