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What has the biggest impact on your credit score?

What has the biggest impact on your credit score?

Whether you’re applying for your first home loan or paying an energy bill, you’d be surprised just how many of your everyday financial decisions impact your credit score.

But what exactly are credit reporting bureaus applying to your credit history and which event makes the biggest impact on your credit score?

Generally speaking, your credit score is calculated based on your credit report, which includes:

  • Money you borrow, including loans and credit cards
  • Your repayment history
  • Credit applications
  • Defaults
  • Bankruptcy
  • Debt agreements

Unfortunately, the impact of each event and how it is graded differs for the credit reporting bureaus in Australia. Because of this, it’s hard to pinpoint exactly which event causes the most positive or negative impact to your credit history. But we can take a look at some of the biggest influencers.

Let’s explore some of the most significant financial decisions and events that can help or hurt your credit score.

1.Paying your bills on time

It’s a no-brainer that providers prefer when customers pay their bills on time, and late payments can negatively impact your credit history. Now, thanks to comprehensive credit reporting, your positive credit history is reflected on your credit report. So, paying your bills on time is more important than ever if you’re trying to improve your credit score.

2.Multiple credit applications

If you apply for credit products, such as credit cards, home loans, car loans or personal loans, and your application is rejected, this can negatively impact your credit score. However, if you’re making multiple applications in hope one will be approved, this is also noted on your credit report. Credit providers can see this and may be less likely to approve you for any products.

Try to only apply for one credit product at a time and ensure you’re bolstering your application as much as possible to meet the provider’s eligibility criteria. The last thing you want is multiple rejected credit applications in your credit history.

3. Maxing out your credit card

If you continuously max out your credit card, or apply for too great a credit limit, this may lower your credit score. This is because your score is partially based on your debt-to-credit ratio. This is a personal financial measure of how much debt you have to your income. Understandably, having too high of a debt-to-credit ratio may showcase a level of financial irresponsibility to credit bureaus. Try to limit your card spending where possible and avoid taking on too much debt.

4.Not paying bills on time

While paying bills on time can improve your credit score, missing bill payments and being late with loans can negatively impact it. This doesn’t just include credit card bills or home loan repayments, but utilities as well, including a phone plan under your name. A late payment is classified as more than 14 days past due date and may be recorded in your credit history.

If you’re having a hard time and need a little breathing room, speak to the provider immediately as they should be able to negotiate a payment plan for you or offer hardship support.

5.Closing a credit card

It may seem counterintuitive as you’re closing off your ability to accrue debt, but oftentimes Australians who close a credit card may find their credit score has lowered. This may be for a number of reasons, including the length of time you’ve had the credit card and whether you’re switching to a new one and have a new enquiry on your file.

It may also be because being able to meet credit card repayments and manage your credit limits is considered a positive impact. Credit bureaus and credit providers want people to showcase a level of financial responsibility, and by closing your card you’re cutting this positive aspect off.


A default may be listed if a payment of over $150 is more than 60 days overdue. The provider and/or a debt collector will have to have taken steps to collect part or all of your payment beforehand, so it should not come as a shock to the individual incurring a default. A default will stay on your credit report for five years.


One of the bigger influences on a credit score are the more severe events, such as defaults or bankruptcy. If you are struggling severely to repay your debts, you may consider this legal process in which you declare you cannot meet repayments. While it can release you from some of these debts, it may have significant impact on your credit score.

The exact impact is unknown, but it’s safe to say that it may potentially bring your score down to zero. We know this because credit reporting bureaus typically note that people with zero scores “have a default or bankruptcy on their file”.

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