Published in October 6, 2023

How Credit Scores and Credit Limits Are Determined in Australia

How Credit Scores and Credit Limits Are Determined in Australia
Home > Credit Scores > How Credit Scores and Credit Limits Are Determined in Australia

Your credit score and credit limit are the keys that can unlock or limit your access to various opportunities. Whether you’re dreaming of a new car, or a home, or simply managing your everyday expenses, understanding how these critical elements are determined is essential.

How Credit Scores are Used by Lenders and Financial Institutions

A credit score is a three-digit numerical representation of an individual’s creditworthiness. It serves as a concise summary of an individual’s credit and repayment history and their ability to manage debt responsibly. In Australia, credit scores typically range from 0 to 1,200, with higher scores indicating better creditworthiness.

Lenders and financial institutions use credit scores as a crucial tool when evaluating loan applications and determining the terms of credit they can offer. Here’s how credit scores are used by these institutions:

  • Loan Approval: Lenders use credit scores to assess the risk associated with lending to a particular individual. Applicants with higher credit scores are generally viewed as less risky and are more likely to be approved for personal loans, credit cards, or mortgages.
  • Interest Rates: Credit scores also influence the interest rates offered to borrowers. Individuals with excellent credit scores often qualify for loans with lower interest rates, saving them money over the life of the loan. Conversely, those with lower scores may be offered loans with higher interest rates.
  • Credit Limits: For credit cards, credit scores play a role in determining the credit limit that a lender is willing to extend to an applicant. Higher credit scores can result in more substantial credit limits, providing borrowers with greater financial flexibility.
  • Terms and Conditions: Beyond interest rates and credit limits, credit scores can also affect other terms and conditions of credit, such as the length of the loan, the required down payment, or the need for a co-signer.
  • Approval Speed: A strong credit score can expedite the approval process. Lenders may have automated systems that approve applicants with high scores more quickly, providing borrowers with faster access to credit.
  • Risk Assessment: Credit scores help lenders assess the risk of potential defaults or late payments. This information is critical for making informed lending decisions.

Learn more about your credit scores from different credit bureaus from the resources below:

Factors That Influence Credit Scores

Your credit score dances to the tune of several factors, each playing its unique role in shaping your financial profile. Let’s dive into the factors that have a significant impact on your credit score.

  • Payment History: Your financial reputation depends on whether you’ve been making on-time payments or if you’ve missed a few beats. Payment history is a critical factor in calculating your credit score. Consistently paying your bills and debts on time can give your credit score a significant boost, making lenders more confident in your ability to manage credit responsibly.
  • Credit Utilisation: Credit utilisation is all about the delicate balance between how much credit you’re using and how much you have available. If you’re maxing out your credit cards or using a high percentage of your available credit, it can put a dent in your credit score. Keep your credit utilisation low, ideally below 30%.
  • Length of Credit History: Your credit score and the age of your credit accounts matters. The older, the better. Lenders in Australia like to see a well-established credit history as it provides a more comprehensive picture of your financial behaviour. If you’re new to the credit game, don’t worry; time will gradually work in your favour.
  • Types of Credit: The diversity of your credit portfolio is another keynote in your credit score’s melody. Having a mix of credit accounts, such as credit cards, loans, and mortgages, can demonstrate your ability to manage various types of debt responsibly. It showcases your financial versatility, and lenders may view this positively.
  • Recent Credit Inquiries: Lastly, your credit score can be affected by recent credit inquiries. Each time you apply for new credit, a note is made in your credit report. Too many inquiries in a short span can raise concerns for lenders, as it might suggest you’re seeking too much credit too quickly. So, it’s wise to space out your credit applications and be selective about when and where you apply.

Understanding these factors that sway your credit score is crucial, as they can dictate your financial opportunities and the terms you’re offered by lenders. Managing your finances responsibly and being mindful of these credit score influencers can help you dance your way to a healthier financial future.

How to Obtain a Free Copy of Your Credit Report in Australia

Monitoring your credit report annually is an excellent way to spot inaccuracies and ensure the information is up to date.

Accessing your credit report is relatively easy, and you’re entitled to one free report per year from each of the three major credit reporting bodies: Equifax, Experian, and Illion. To obtain your free report, you can visit their respective websites and request a copy online.

Helpful Tip 💡Did you know that you can also access your credit score for free? Here at Tippla, we do our best to provide our users with up-to-date financial technology that they can rely on. Sign up to Tippla today and access our credit score monitoring features, spend trackers, credit school, and more! 

The Impact of Credit Scores on Credit Limits

In the realm of Australian finance, your credit score can either unlock generous credit limits or leave you with a restricted purse. Let’s delve into the profound impact credit scores have on the credit limits you’re offered and the strategies you can employ to reach those higher limits.

Your credit score is like a guide for lenders in Australia. It helps them decide how much credit they can comfortably offer you. If you have a high credit score, it’s like having a ticket to more significant credit limits. Lenders trust people with excellent scores more and are willing to give them larger credit amounts. On the flip side, if your score is lower, you might get a smaller credit limit or even a rejection. So, taking care of your credit score is vital if you want access to higher credit limits.

Credit Limits and How You Use Them

In Australia, how you use your credit limits matters. Lenders pay attention to what’s called “credit utilisation,” which is how much of your available credit you’re using. It’s good to keep this below 30%. When it’s low, it not only keeps your credit score healthy but also makes it more likely that you’ll be offered higher credit limits. Lenders see this as a sign that you’re responsible with your borrowing and don’t rely too much on credit.

Requesting Credit Limit Increases

When it comes to managing your credit wisely, requesting a credit limit increase can be a strategic move.

If you want more spending power on your credit card, you can request a credit limit increase. It’s not too complicated. You can usually do it online through your bank’s website or by calling your credit card company. They might want to know some details about your money, like how much you earn and spend. It’s really important to be honest when you apply. After you ask, the company will check your financial situation and how you’ve used credit before. If they say yes, they’ll let you know your new spending limit, usually in writing or online.

Using More Credit Wisely

  • Stick to a Budget: Before making any purchase, have a clear budget in mind. Only use your credit card for expenses you can comfortably pay off when the bill arrives.
  • Timely Payments: Pay your credit card bills on time and in full each month. Late payments not only incur fees but can also harm your credit score.
  • Set Alerts: Most credit card providers in Australia offer alert services. Set up notifications for due dates and transaction limits to stay in control of your spending.
  • Minimise Balance Carries: Avoid carrying a balance on your credit card whenever possible. The interest rates on credit cards can be high, and this can lead to unnecessary debt.


Responsible credit management in Australia is more than just a financial practice; it’s a cornerstone of sound financial health. Understanding the factors that influence credit scores, accessing credit reports regularly, and employing strategies for prudent credit card usage are essential steps toward financial stability.

By maintaining a good credit score, managing credit limits wisely, and avoiding the pitfalls of excessive debt, individuals can harness the power of credit to achieve their financial goals while safeguarding their financial future.

While we at Tippla will always do our best to provide you with the information you need to financially thrive, it’s important to note that we’re not debt counsellors, nor do we provide financial advice. Be sure to speak to your financial services professional before making any decisions.

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