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How is an Australian credit score calculated?

By Simone Rosamond-Davis

Some people don't pay much attention to their credit, but when the time comes to apply for a mortgage, financing a car, or even getting a new mobile phone, your ability to do so will likely depend on your personal credit score.

Lenders use your credit score to decide how much of a risk you pose to them as a borrower. It tells them how likely you are to repay a loan and whether you are likely to make your payments on time. Your credit score is calculated by scrutinizing your current financial health and examining your payment history-including how much open credit you currently have and if you have paid your bills on

Where does your credit score come from?

Individual lenders - In Australia, each lender generates its own credit score. A bank cannot see the credit files that you have with other financial institutions, but they do use Veda (see below) and their own files to check your history if you are an existing customer.

Assets - If you have more debts than assets and savings and you have a multitude of credit cards and loans, you become higher risk to lenders. If you earn a good wage but do not have any savings or assets, you may still be declined.

Stability - Lenders will consider details including how long you have been in your current job and how long you have lived at your current address.

Loan purpose - Credit score tests are harder to pass the more money you are trying to borrow. Lenders rate different loan types as more or less risky with larger loan sizes obviously presenting a higher risk to lenders.

Veda - Unlike in the U.S. where there are multiple country-wide credit reporting agencies, in Australia Veda Advantage is the main provider of credit file data, which contains details of any payment defaults, court judgments or bankruptcy listings you have had. It also shows if you have applied for loans in the past five years, which can have a significantly negative impact on your credit score.

One benefit of the Australian system is that it gives borrowers an opportunity to get approved for a loan with one lender, even if a previous lender has declined a loan based on a poor credit score. But remember: even though a credit score won't follow you between banks, Veda Advantage tracks parts of your financial history from the past five years.

 See related: What's a credit score, and why should you care?; Your credit score doesn't always matter

Published: April 13, 2012

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