Your individual credit score and company credit score are two of the most important indicators of creditworthiness, and showcase your financial responsibility to credit providers, potential new suppliers and trading partners. A ‘good’ to ‘excellent’ credit score is your key to gaining approval for financial products like a home loan or a credit card, or for obtaining a business loan for your company.

A ‘good’ credit score in Australia is one that sits above the ‘average’ band, as dictated by a credit reporting bureau or credit rating agency. The specific ‘good’ credit score will differ depending on the reporting bureau or rating agency you’re checking with, as various bureaus and agencies have different score ranges and datasets.

What is a credit score and how are credit scores used?

In Australia, a key indicator of your reliability with money and likelihood of credit risk is your credit history and associated credit scores. Put simply, a credit score is a numerical measurement of your creditworthiness, and ability to pay bills, loans, and other debts on time and in full.

Credit scores are most commonly used to assess an individual or company’s ability to service a credit product, including:

• Credit cards
• Personal loans
• Home loans
• Business loans
• Utility bills
• Mobile phone plans

Banks and lenders have strict eligibility criteria that individual borrowers and businesses must meet to gain approval for credit products – including a ‘good’ to ‘excellent’ credit score. If an entity has a poor credit score, they may be more likely to default on a loan. Therefore, a lender may choose to not approve them for financing to mitigate this risk.

For businesses, a credit score can also be an indication of the payment behaviour of potential trading partners. Before your company engages with a new entity, it’s recommended you run a credit report on them to do your due diligence around their default risk. If your company is the one with the ‘poor’ credit score it may limit your business from taking on new clients or gaining financing from banks and lenders.

What are the benefits of having a good credit score?

The most significant benefit of a ‘good’ or higher credit score is that you are more likely to be approved for credit products. The higher your credit score, the greater your chance of approval from a bank, lender, utility provider, or even a new client.

Access to a wider variety of credit products creates more options. This flexibility means your business may be more likely to grow, or you may be able to put a foot on the property ladder with a home loan, depending on your financial needs.

What is the highest credit score you can get?

The highest possible credit score an individual or company could achieve will depend on the credit reporting bureau (for individuals) or rating agency (for businesses), as each have their own numerical systems and rating category thresholds. The highest band you can reach is the ‘excellent’ category, achieving an excellent credit score.

So, what is an excellent credit score for individuals? It depends on who you ask. Major reporting bureaus can have credit score ranges between 0-1200 and 0-1000 respectively. The highest possible credit score you could obtain as an individual is therefore between 1000 – 1200, depending on the bureau you ask.  

For businesses, the grading system will also depend on the rating agency. At CreditorWatch, our credit reports provide extensive information, including company default risk graded from A1 to F. As a business, the highest possible score you could get in this instance would be A1.

We don’t just stop at default risk. CreditorWatch also provides additional ratings systems, so your business has access to the most comprehensive and high-quality analysis. These tools allow the team to make more empowered decisions around which entities to engage with:

• Payment Rating grades your customers from A to E, depending on their payment history, so you know their likelihood of paying you on time.
• RiskScore showcases a business’ likelihood of default in the next 12 months, as determined by a numerical credit score between 0-850. The higher the score, the lower the risk.

What is an average credit score?

What is considered an ‘average’ credit score will depend on the reporting bureau or rating agency that you enquire to.

• For individuals, an average credit score is likely to sit in the 550 – 670 range.
• For businesses, an average default risk could mean a grade of B-C.

If you’re wondering what is a bad credit score, or how you can work to improve a poor credit score, please read our guide to bad credit scores .

Are personal and business credit scores the same?

No, personal and business credit scores are not the same. An individual will be assessed for a credit score depending on their personal financial history, from their first mobile phone plan to their home loan and latest credit card.

A business credit score is reflective of a business’ financial health and creditworthiness. It does not include personal information used to determine an individual’s credit score. The data used instead incorporates:

• Company details, such as shareholders and structure
• The Personal Property Securities Register (PPSR)
• Late payments for invoices
• Defaults registered against the company
• ATO tax defaults
• Court actions
• Instances of cross-dictatorship
• ASIC notices against the business

What impacts your credit score and how often does it change?

While the specifics of how your individual or company credit score is graded differs depending on the bureau or agency, there is a general pattern of similar attributes that impact your score, including:

• Any credit products you’ve applied for
• Credit limits for each product
• Number of hard credit enquiries
• Repayment history, including late payments (exceeding 14 days)
• Adverse events, such as payment defaults.

There is no set schedule for when a credit history and credit score may be updated. This could occur monthly, or when you or your business makes its latest repayment, or whenever an adverse event is recorded. Each bureau and agency has their own policy determining the frequency of their data gathering and the length of time details remain on a credit file.

What can you do to improve your credit score?

Credit scores are determined by the information recorded in your individual or company credit file. To boost a credit score, the following may be worth considering:

1. Check for errors – Go through the credit history thoroughly to check for any errors, such as a family member or business with a similar name having their poor payment behaviour recorded on your file. If an error is detected, flag this immediately with the reporting bureau or rating agency. Keep in mind that every individual in Australia has access to one free copy of their credit report and credit history each year.
2. Boost your savings – Showcase your financial responsibility by making regular deposits into a savings account. Thanks to Comprehensive Credit Reporting, positive information like this will be shared by banks and lenders.
3. Meet your repayments – Late payments are one of the easiest ways to lower your credit score. Set calendar reminders or register for direct deposits to ensure your individual and business payments are made in a timely manner.
4. Pay off your debts – If you have outstanding loans, such as a personal loan or a business loan, consider adjusting your budget to pay these off. Reducing your number of liabilities could improve your score.
5. Don’t close that credit card account! A common misconception by many Australians is that cutting up and ditching a credit card can improve a credit score. The truth is that using a credit card responsibly – paying off your balance in full each statement period – is a positive indicator of creditworthiness.

What may negatively impact your credit score?

Adverse events and poor payment behaviour will negatively impact a credit score. These events may stay on a credit history for a number of years:

For individuals:

• Repayment history – 2 years
• Credit enquiries and applications – 5 years
• Writs, summons and court judgements – 5 years
• Payment defaults – 5 years
• Bankruptcies, debt agreements and personal insolvency agreements – 7 years

For businesses:

• Repayment history – 2 years
• Credit enquiries, payment defaults and court judgements – 5 years
• Overdue accounts listed as infringements – 7 year

How can you check your credit score?

Checking your individual credit score can be as simple as registering with any of the free credit score checking companies online.

For businesses, it may be worth considering a free trial with CreditorWatch’s Credit Reporting Tools to not only gain access to your credit score, but begin the process of keeping on top of new and existing client’s financial stability.

FAQS:

What is a good credit rating to get a business loan?

Businesses may want to consider aiming for:

1. A Default Risk score starting with an ‘A’
2. A RiskScore of 700 and above
3. A Payment Rating of A-B

What is a good credit score for renting an apartment?

In Australia, your credit score is not assessed when applying to lease an apartment.

What is a good credit score to buy a house/for a mortgage?

A good credit score for a home loan for an individual will be one between 625 – 739, depending on the credit reporting bureau.

What is a good credit score for a car loan?

For an individual seeking a car loan, a good credit score may be one between 625 – 739, depending on the credit reporting bureau. For a business, this may require having a Default Risk score starting with an ‘A’.

What is a good credit score for my age?

There is no requirement to have a certain credit score by a specific age. Naturally, an individual or a business will increase its credit score over time, as credit products are applied for, and repayments are made on time.

Young Australians are unlikely to have credit scores or may have very short credit histories. If you’re a younger Australian, consider building up your credit score by applying for your own phone plan, or going on your parents’ energy bill.

What is a good business credit score?        

A good credit score for a business at CreditorWatch would be

1. A Default Risk score of, or near, A1
2. A RiskScore of, or near, 850
3. A Payment Rating of A