When applying for credit within a bank in Australia, you can expect your credit history to be checked with their chosen credit reporting bureau. There are three consumer-focused credit reporting bureaus providing creditworthiness reports and scores for individual borrowers in Australia: Experian, Equifax, and Illion. These credit reporting bodies play a vital role in assessing your financial profile. For businesses, there is a broader array of credit scoring agencies, including our market-leading CreditorWatch team. Each will independently score you based on their data sources, which may result in differing results. 

What is a credit score?

A credit score is a numerical representation of your risk as a borrower. Having a good credit score is crucial for your financial well-being. It is an informed algorithm, produced by previous actions such as overdue repayments on credit, default notices, and declared assets. With the implementation of a new credit score model – Comprehensive Credit Reporting (CCR), the scope of what can be covered by credit reporting has widened. It can now also include information on items such as credit card accounts, personal loan history, and even details about past bankruptcies. Generally speaking, the higher the score, the lower the risk to the credit provider. 

For individuals in Australia, there are three consumer-focused credit reporting bureaus, each providing a unique score and report. Illion, Equifax, and Experian individually collect their lender data, including repayment history, and do not corroborate on scores. Further, they collate information relevant to your risk as a borrower at different time points. 

They even implement different scales for their consumer credit scoring: Equifax credit scores assess borrowers from 0-1200, whereas Illion and Experian credit scores use a scale of 0-1000. This disparity often results in differing credit scores for the same borrower from one bureau to the next. 

For businesses, various credit reporting agencies can detail the credit risk of trading partners. Leading the charge is our team at CreditorWatch, offering clients the leverage of sophisticated machine learning and extensive trade data. Our RiskScore, credit reporting, and payment prediction are among the most advanced available to Australian companies. 

Your credit score information becomes more critical as the value of the loan you’re seeking from financial institutions increases. For example, it is likely to be scrutinized more heavily for a home loan than a car loan. This is because the mortgage is a more significant debt, representing a higher risk to the creditor. 

How do banks use credit scores?

Every major Australian bank uses credit scoring in some capacity when assessing the eligibility of customers applying for different credit products. It also plays a significant role in influencing their decisions when offering a credit limit, especially for business loans or credit cards/credit accounts. 

What credit score company do banks use?

It is at their discretion as to which bureau or agency a bank sources your credit file from, and the weighting they give to certain events found. For example, some lenders are more likely to decline your application if there are multiple hard credit inquiries, commonly referred to as credit enquiries, on your credit file over a short time, as this may make you appear ‘credit hungry’ and less responsible with your finances. Other lenders may place a greater focus on your asset holdings and liabilities. 

On the reporting side, Comprehensive Credit Reporting has meant that all participating institutions in Australia are now required to report additional relevant borrower information to all three credit bureaus. Participating institutions include each of the Big 4 Banks and smaller lenders such as ME Bank. Much of this newer information centers around more positive borrower information, such as a stellar loan repayment history. The hoped-for result is a clearer picture of borrowers across each of their credit files, incorporating a fairer balance of positive and negative events. 

Do banks conduct any in-house credit rating?

All banks and lenders have their own in-house eligibility criteria and tools to assess a customer’s ability to service a credit product. Many lenders may combine your bureau credit file with further credit information they source through in-house risk management processes. For example, Commonwealth Bank of Australia (CBA), National Australia Bank (NAB), and St George are all known to conduct manual credit assessments on borrowers in addition to the inquired credit file. This may also provide an opportunity for individuals with ‘bad credit‘ to present additional information for consideration during the loan approval process. 

An assessment may include information such as income, employment status, and residency. The formatting, applied scale, and meaning of their manual assessments all vary from one institution to the next. So, your NAB credit score is likely to be different from your Commbank credit score and so on. 

By contrast, ANZ and Westpac are known to rely more solely on the credit score information provided by the bureau. As each bank has its mix of credit risk management procedures, failure to secure credit with one may not necessarily mean that you are ineligible for the same loan at all of the others. Especially given that, as noted above, your score with each bureau may vary. However, multiple failed applications will result in numerous hard inquiries on your file, which can reduce your credit score over time.
 

Which bank should I use for my loan applications?

Basing your choice of bank on its credit scoring infrastructure alone may be a mistake. You should always compare your options thoroughly and carefully weigh all variables, including interest rates, fees, and other costs, product features, the lender itself (does it align with your values? etc.), and more. 

Using a broker may be worth considering, as multiple failed credit applications can negatively affect your credit score range. A mortgage broker, for example, may be able to source a credit solution specific to your financial situation. It can be useful to pre-emptively assess your borrowing capacity and the various credit products available, and a broker may create a greater understanding in this regard. 

Credit reports and credit scores for business

For business owners seeking to detail the creditworthiness of trading partners, the solution is only a click away. Our CreditorWatch suite of products provides everything from the likelihood of individual debtor payment, industry-leading RiskScore and credit reporting capabilities, and data portfolio management. It is the one-stop shop for debtor risk management, allowing for empowered decision-making and greater peace of mind. 

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