Whether you’re a sole trader, an independent contractor, or a self-employed small business owner, a good credit score can help you in more ways than one. It can enable you to borrow more money, buy more items on credit, and access better loan options.
What is considered a good credit score depends on which credit reporting agency you ask, which lender or credit provider is assessing you, and what type of credit products you’re planning to access. In this article, we’ll look at the basics of what a good credit score is and how you can improve it, regardless of your current situation.
What is a credit score?
A credit score is a number based on your financial history that lenders use to make an educated assumption on how responsible you are with money – in particular how responsible you’ll be with the money they lend to you.
Your credit score is a significant factor (sometimes the most important factor) in determining whether you’re considered for a loan or whether you’re approved for credit.
Lenders use credit scores to assess risk and determine how much they’ll charge you for borrowing money.
Credit bureaus (or credit reporting agencies) are businesses that compile and sell information about your credit history. Lots of lenders and credit providers prioritise the information provided by credit bureaus, then also use their own databases to verify and cross-check the information they receive.
When considering you for financing, lenders and credit providers generally see sole traders with a higher credit score as a lower risk to lend to, and sole traders with a lower credit score as a higher lending risk. Which is why having a good credit score is important if you’re looking to get any kind of commercial vehicle financing.
What can a good credit score help with?
There are many benefits to having a good credit score.
It can:
- Help you get approved for a loan to purchase a new vehicle for work
- Influence a lender or credit provider to give you a lower interest rate and more flexible terms on the loan
- Enable you to finance your vehicle purchase on interest-free terms, and you may be offered benefits such as free or discounted vehicle insurance
- Allow you to access credit cards with a low deposit, which makes it easier to purchase more things when you need to
- Give you more negotiation power with your lender/credit provider, paving the way to get approved for higher amounts
How is a credit score calculated?
There are three main credit bureaus in Australia that calculate your credit score – Equifax, Experian, and Illion.
Although these bureaus haven’t revealed their exact formula for calculating credit scores, various factors have been shown to influence their calculations including, but not limited to:
- How many late payments you have on record (payment history)
- The types of credit you have
- How long you’ve held each type of account open
- How much money is owed on loans or credit cards
- How much of your credit limit is used
- How long it’s been since you last paid a bill
- Whether you have multiple lines of credit
- How many credit applications you’ve made in the past five years
- If someone else defaults on a joint debt
- Court judgements
- Bankruptcies
- Serious credit infringements
What can cause a bad credit score?
Some factors that can negatively impact your credit score include:
- Lots of loan applications and credit accounts. Having multiple accounts and applications with your creditors isn’t a good look because it suggests that you may not be able to pay off your debt at any given time.
- Too many credit enquiries. Every time you apply for credit, the lender makes a credit check. After the enquiry has been completed, the file is then recorded on your credit report, which leaves a trail of enquiries that future lenders may not look kindly upon – especially if multiple are made within a short timeframe.
- Late or skipped payments. It’s always better to make a repayment on time, even if it’s a small amount, because poor payment habits can be a warning sign to lenders that you might be a high risk applicant.
What is a good credit score in Australia?
Each of the three main credit bureaus have slightly different ways of scoring your credit report, but in general:
- an Illion credit score over 500 is “good”
- an Experian credit score over 625 is “good”
- an Equifax credit score over 661 is “good”
Your score varies between 0 – 1,200 depending on the credit bureau, but no matter which one you use, the higher the score, the better it generally is.
What’s a good credit score according to Illion?
Your Illion score is a number that falls between 0 and 1,000 – with higher scores suggesting healthier credit ratings than lower scores.
| Credit Score | Illion rating |
| 1 – 299 | Low |
| 300 – 499 | Room for improvement |
| 500 – 699 | Good |
| 700 – 799 | Great |
| 800 – 1,000 | Excellent |
Note: Illion also has something they call a ‘Zero score’ which they say indicates that “…there’s something negative on your file, such as a payment default. You might have a court judgement or bankruptcy. But you don’t need something that drastic to push your score down – even late payments look really bad to companies you want to get credit from. You probably have a few credit enquiries on your file, which means you’ve applied for credit and may have been declined“.
What’s a good credit score according to Experian?
Experian’s credit scoring falls in a five bracket range, and is a number between 0 and 1,000.
| Credit Score | Experian rating |
| 0 – 549 | Below average |
| 550 – 624 | Fair |
| 625 – 699 | Good |
| 700 – 799 | Very good |
| 800 – 1,000 | Excellent |
What’s a good credit score according to Equifax?
Equifax suggests that credit scores falling inside their ‘very good’ and ‘excellent’ brackets are suitable for applying for loans, while scores below these may need to be improved.
| Credit Score | Equifax rating |
| 0 to 459 | Below average |
| 460 to 660 | Average |
| 661 to 734 | Good |
| 735 to 852 | Very good |
| 853 to 1,200 | Excellent |
What is the average credit score in Australia?
According to research compiled by Finty, the average credit score in Australia is 657. Broken down by state, it looks like this:
| State | Average credit score |
| ACT | 680 |
| QLD | 641 |
| NSW | 664 |
| NT | 660 |
| SA | 653 |
| TAS | 643 |
| VIC | 668 |
| WA | 650 |
Where can you do a credit score check?
You can do a credit score check through many different providers, however, a good starting point is doing the check with one of the three main credit reporting agencies in Australia that we mentioned earlier.
Equifax is the largest credit reporting agency in Australia. It provides personal and business credit reports country-wide. You can get a copy of your Equifax free credit report here and it includes:
- Your credit rating
- Key factors impacting your credit rating
- Credit products you currently hold
- Past applications you have made for credit
- Repayment history (subject to your lender providing this information to Equifax)
- Overdue debts that you have been listed as a default
You can also check if information in your Equifax Credit Report is accurate, and if not, Equifax say that they can investigate any inaccuracies for free.
Experian is a credit reporting agency used by many lenders and credit providers across Australia. You can get a copy of your Experian credit report here which includes:
- Your Experian Credit Score
- Consumer credit enquiries
- Consumer credit accounts
- Consumer credit history
- Consumer defaults
- Personal statements
- Any serious credit infringements
The last, but by no means the least, of the three major credit bureaus is Illion.
If you’re keen to see a free credit report from Illion with your credit score you can do so here, and they also offer a free credit score check through something called Credit Simple.
Alternatively, you can check out our article with step by step instructions on how to do a credit score check with all three of the credit bureaus.
How to fix your credit score
Now that you know what the main credit reporting agencies consider a good credit score, and you may have even requested your credit report from one (or all) of them, you may not be happy with where your score currently stands.
If this is the case, there are several things you can do to improve your credit score including, but not limited to:
- Fixing any current credit reporting mistakes
- Making repayments on time
- Repaying existing debts
- Spacing out credit applications
- Potentially keeping finished credit accounts open
We dig deeper into this, and more, in our article on how to improve your credit score when you work for yourself.
What if you need a work vehicle now and don’t have time to improve your credit score?
While you’re perfectly capable of taking the steps to fix your credit score and get the commercial vehicle financing you need, perhaps you just don’t have the time? Maybe you’ve got a job lined up, ready to go right now, but you need your own vehicle to do it.
The good news is, ARG’s Rent To Buy solution is a leading alternative to commercial vehicle financing.
It’s designed to quickly get you on the road and working, while also giving you a path towards buying the vehicle outright. And because there’s no need for any loans or financing, it means there’s no fuss around your credit score.
Find out more about ARG and how you can Rent To Buy the work vehicle you need.
Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstance before acting on it, and where appropriate, seek professional advice from a finance professional such as an adviser.