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What is the perfect credit score and how do I get it?

What is the perfect credit score and how do I get it?

Credit scores are calculated by private credit reporting bodies, so the perfect credit score varies from organisation to organisation.

There are three companies in Australia that calculate credit scores:

  • Equifax (perfect score = 1,200)
  • Experian (perfect score = 999)
  • Illion (perfect score = 1,000)

Each of these credit reporting bureaus uses a scoring system with five different tiers:

TierEquifaxExperianIllion
1Excellent = 833 to 1,200Excellent = 961 to 999High end = 800 to 1,000
2Very good = 726 to 832Good = 881 to 960Great = 700 to 799
3Good = 622 to 725Fair = 721 to 880Average = 500 to 699
4Average = 621 to 510Poor = 561 to 720Room to improve = 300 to 499
5Below average = 0 to 509Very poor = 0 to 560Low = 0 to 299

Case study

John wanted to get a credit card for his overseas holiday, which was due to start in 15 days. He was worried that his new card wouldn’t arrive in time, so he decided to maximise his chances by sending applications to six different banks. His plan was to use whichever card arrived first and to cancel the others when he returned from his holiday.

What John didn’t realise, though, was the damage this would do. That’s because his credit file now showed that he’d made six credit card applications in a hurry – just the sort of thing someone does if they’re bad at managing money. It didn’t matter that John cancelled the five extra cards when he got back home – the negative act remained part of his credit history.

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How to get a good credit score

To understand how to get a good credit score, you first need to understand the thinking behind the system.

A credit score is a number that indicates how credit-worthy you are, based on your history of paying rent, phone bills, credit card bills, car loans – indeed, any sort of loan.

As a general rule, lenders believe that Australians with higher credit scores are less of a risk than those with lower credit scores. So they regard the first group as more desirable customers than the second.

Here is how lenders and other credit providers tend to assess Australians:

Higher credit scoreLower credit score
Better track record of managing loansWorse track record of managing loans
More stable and responsibleLess stable and responsible
More likely to repay a loanLess likely to repay a loan
More likely to have a loan approvedLess likely to have a loan approved
More likely to qualify for the best dealsLess likely to qualify for the best deals

If you want to get a good credit score, you need to establish a history of using credit responsibly. That means doing these three things:

  1. Limiting your number of credit applications (applying for one credit card is better than applying for five)
  2. Paying bills on time (aim to pay all your bills by the due date)
  3. Paying off loans (aim to make every repayment by the due date and to pay off the entire on schedule)

Australia has a system known as comprehensive credit reporting, which means that credit reporting bureaus weigh up both positive and negative acts when calculating your credit score. (Before comprehensive credit reporting was introduced, in 2014, only negative acts were considered.)

To get a tier-one credit score, you need the ratio of positive to negative to be as high as possible. That means:

  • Doing one positive act after another, over the long term
  • Minimising – or even eliminating – negative acts

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Fact Checked -

This article was reviewed by Personal Finance Editor Alex Ritchie before it was published as part of RateCity's Fact Check process.

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Learn more about credit cards

How easy is it to get a credit card?

For most Australians, there are no great barriers to applying for and getting approved for a credit card. Here are some points that a lender will consider when assessing your credit card application.

Credit score: A bad credit score is not the be all and end all of your application, but it may stop you being approved for a higher credit limit. If your credit score is less than perfect, apply for the credit limit that you need, rather than the one you want.

Annual income: Most credit cards have minimum annual income requirements. Make sure you’re applying for a card where you meet the minimum.

Age & residency: You need to be at least 18 years old to apply for a credit card in Australia, and most require that you are an Australian citizen or permanent resident. However, there are some credit cards available to temporary residents.

Do you need a credit card to get a loan?

You do not need a credit card to get a loan, but you usually need to have a credit history. Without a credit history, a financial institution cannot assess your ‘credit worthiness’, or your capacity to pay off the loan.

If you don’t have a credit card, your credit history can reflect any record of paying off an asset. Without any credit credit history, you’re limited in the type of loans you can apply for. But you may be able to obtain a secured loan against an asset. For more information on improving your credit score, go here

What happens if I have a bad credit score?

If you have a bad credit score, you might encounter two main problems. First, the lower your credit score, the more likely you are to be rejected when you apply for a loan or any other credit product. Second, if your application is accepted, the less likely you are to qualify for the lowest interest rates.

What is the American Express credit card insurance coverage?

Several American Express credit cards, including the Gold, Platinum and Green cards, come with international and domestic travel insurance, shopping and purchase protection and smartphone screen insurance. All you have to do to activate your American Express credit card insurance cover is use it to pay for eligible purchases, travel, and a smartphone.

The complimentary travel insurance requires you to be less than 80 years old with no pre-existing diseases and your travel must begin and end in Australia.

To make an American Express credit card insurance claim, you’ll need to lodge your request with Chubb Claim Centre within 30 days. Submit the form along with supporting documents like medical reports, original invoices and receipts. You can also contact Chubb on 1800 139 149 or file a claim via the Chubb website.