How your credit score sets your personal loan rate

A credit score is a number a credit reporting body calculates from the information in your credit report. It is a summary, not the thing itself: lenders look at the underlying report, and many run their own internal scoring on top of it using data the bureau never sees, such as your income, your existing relationship with them and your stated expenses.

Australia now has two main consumer credit reporting bodies, Equifax and Experian, after illion’s consumer bureau was folded into Experian in 2026. They do not hold identical data or use identical scales. Equifax scores run to 1,200 and Experian uses its own scale, so a number that looks strong on one can sit mid-range on the other, which is why comparing a score quoted by one free service against a band published by a lender using a different bureau tells you very little.

Since comprehensive credit reporting was introduced, the report includes positive information as well as negative. Accounts you hold, credit limits and up to two years of monthly repayment history are all visible, alongside defaults, court judgments and applications. A clean recent repayment history is now something you can actively build rather than merely avoid damaging.

What sits in an Australian credit report:

• Identity information, including addresses and employers you have supplied on applications.
• Accounts held, with the credit limit, the opening date and, where closed, the closing date.
• Repayment history for the last 24 months on consumer credit, month by month.
• Applications for credit, which stay on file for five years regardless of whether the credit was taken up.
• Defaults, generally for overdue amounts of $150 or more that are at least 60 days late and properly notified, remaining for five years even once paid.
• Financial hardship information, recorded since July 2022 when a lender agrees to a hardship arrangement, kept for one year.
• Court judgments, kept for five years, and serious credit infringements and insolvency information, which can stay longer.

Most personal loan lenders in Australia now price by risk. Rather than one rate for everyone, they publish a band, and each approved applicant is placed within it according to their assessed credit risk. The bottom of the band is real, but it is reserved for applicants with a strong file, stable income and low existing commitments.

This is why comparing the advertised figure alone is misleading, and why the comparison rate matters. The comparison rate folds establishment and ongoing fees into a single number on a standard example loan, so it captures the lender that offers an attractive headline rate alongside a large establishment fee. What neither number tells you is where in the band you personally will land.

The size of the spread is worth seeing in dollars, because on an unsecured loan it is larger than most people picture.

Security changes the picture as well. A secured personal loan, backed by a car or another asset, generally prices below an unsecured one because the lender’s downside is covered. The trade is real: default risks the asset. Lenders also price by purpose, and some offer lower rates for specific uses such as electric vehicles or home improvements, so a general-purpose loan is not the only option.

The item people underestimate is applications. Every formal application is recorded whether or not you proceed, and a lender assessing you next month sees the whole cluster. Applying to five lenders to find out who says yes reads, from the other side of the desk, as someone who has been declined four times. Comparing products and using rate estimates that do not leave an enquiry costs nothing and does not create the pattern.

The item people overestimate is the credit limit on an unused card. It does affect borrowing capacity, since lenders assess the limit rather than the balance, but closing accounts also shortens your visible credit history. Closing a card that is never used lowers the limits a lender assesses. Closing several long-held accounts on the theory that fewer is better also shortens the visible history.

None of this requires money, and all of it can change the rate offered:

1. Both reports. They are free, they take minutes, and lenders do not all use the same bureau. The accounts list says more than the score.
2. Corrections. Errors are more common than people expect, particularly accounts you closed years ago and defaults recorded without proper notice. Corrections are free and the bureau must investigate.
3. Repayment history. Twenty-four months of history is visible, and the most recent months carry the most weight. Direct debits set slightly above the minimum guard against a missed payment.
4. Card limits. Lenders assess total available limits, not just what is owed, so unused cards count against capacity.
5. Other applications, including buy now pay later accounts and store cards. Each one is visible on the file.
6. Rate estimates. Many lenders now offer an indicative rate using a soft check that other lenders cannot see, which shows where an applicant sits before a formal application.
7. The number of applications. One application to a lender whose criteria fit reads very differently on the file from a spread of hopeful ones.