How Is Your Credit Score Calculated In 2026

What Does a Credit Score Measure?

A credit score gives credit providers an indication of the risk involved in lending to you.

It is based on the credit information available at the time the score is produced. A higher result generally indicates a lower predicted risk, while a lower result may suggest a greater chance of repayment problems.

The score does not measure your income, savings or personal worth.

A person with a high salary can have a low score after missing repayments or applying for credit several times. Someone on a lower income may have a sound score after managing a small number of accounts consistently.

Credit scores are based on information in a credit report, including how much has been borrowed, the number of applications made and whether repayments were made on time.

How Is a Credit Score Calculated?

A credit reporting body runs the information in your report through a statistical scoring model.

The model looks for combinations of credit behaviour associated with higher or lower risk. It then produces a number based on the information held at that time.

There is no standard Australian formula that says a late payment costs a fixed number of points or that an on-time payment adds a fixed amount.

The effect of one event depends on the rest of the file.

For example, a recent late payment may affect a report containing years of well-managed accounts. It may have a different effect on a short report that also contains several recent applications.

Equifax and Experian do not publish the exact weighting given to each part of a report. You can assess the general condition of your file, but you cannot reproduce the score yourself.

Repayment History

Repayment history information shows whether you met your consumer credit payment obligations during a particular month.

It may be recorded for eligible accounts such as home loans, personal loans and credit cards. It can show that a payment was made on time or that the account was behind.

Experian identifies payment history as a factor with a high level of influence on its score. Consistent repayments may support the result, while missed payments can reduce it.

Repayment history remains on a consumer credit report for two years. The Office of the Australian Information Commissioner explains that it records whether a person met their consumer credit payment obligations in a given month.

Late Payments – Will One Late Payment Lower Your Credit Score?

It can, but the result will not be the same for everyone.

The timing of the payment matters. So does the number of missed payments, how recently they occurred, and what else appears in the report.

A single older delay may affect a score differently from several missed payments recorded over recent months.

If a repayment record appears wrong, you can ask the credit provider or credit reporting body to correct it. Credit Wipe also reviews repayment information that may have been recorded incorrectly through its repayment history removal service.

Defaults

A default records a payment that reached a serious stage of arrears.

A credit provider may generally report a default when the overdue amount is at least $150, the payment has been overdue for at least 60 days, and the required notices have been sent.

The OAIC sets out the notice and overdue payment requirements in its guidance on repayment history and defaults.

A default can remain on a credit report for five years.

Paying the debt should update the listing, but it usually does not remove an accurate default before the retention period ends.

The age and status of the default may affect how it is assessed. A recent unpaid default can present a different risk from an older entry that has since been paid.

A default may be open to correction if the information is wrong or the reporting requirements were not followed. Credit Wipe provides further information about default removal.

Credit Enquiries

A credit enquiry may be recorded when you submit a formal application and the provider checks your credit report.

The report can usually show who enquired, when it occurred and the type of credit involved.

Several enquiries within a short period can affect the way your file is assessed. They may suggest that you have been seeking finance frequently, even if some of the applications were declined or never completed.

This often happens when a person receives a rejection and applies with several other providers straight away.

The additional applications do not address the cause of the first decline. They may simply add further enquiries to the report.

Checking your own credit report is different. Personal access does not count as a formal application for credit.

An enquiry you do not recognise should be checked with the provider named on the report. Credit Wipe may be able to investigate an inaccurate or unauthorised entry through its credit enquiry removal service.

Account Types and Credit Limits

Your report may contain home loans, credit cards, personal loans, car finance and other credit accounts.

Experian considers the type of credit held, the type of provider, and the limits attached to accounts. Its full calculation remains confidential.

Holding different account types does not automatically improve a score.

Opening an account for the sole purpose of changing your credit mix can create a new enquiry, a new credit limit and another repayment obligation.

Credit limits can also affect a lender’s assessment.

A credit card with a zero balance may still have a $20,000 limit. A home loan provider may allow the full facility to be used after the mortgage is approved.

Reducing an unnecessary limit may help your borrowing capacity. It does not guarantee that your Equifax or Experian score will rise.

Account Age, New Credit and Closed Accounts

The length of your credit history provides a scoring model with evidence of how you have managed your accounts over time.

A short history is not the same as bad credit. It simply means there is less information available for Equifax or Experian to assess.

Opening a new account can change several parts of your report at once. It may add an enquiry, a credit limit, a repayment obligation and an account with little history.

This is one reason several applications made close together can affect a file. The model sees a wider change in the person’s credit position.

Closing an account also changes the information available.

It may reduce the number of active facilities and the amount of credit available. If the account was held for several years, closing it may also alter the age profile of the open accounts.

A small score movement should not prevent you from closing an account that has unnecessary fees, a large unused limit or no practical purpose.

Court Judgements and Insolvency Records

A consumer credit report may include credit-related court judgements, bankruptcy information and other personal insolvency records.

The OAIC confirms that reports can contain defaults, court judgements and bankruptcies, along with details of current and past consumer credit accounts.

These records can affect a score because they point to a serious past event involving unpaid debt.

The circumstances still matter. A lender may consider when the event occurred, whether related debts have been paid, and how the applicant has managed their finances since then.

A judgement that has been set aside or recorded incorrectly may need to be corrected. Credit Wipe explains the possible process on its court judgement removal page.

How Equifax Calculates a Credit Score

People searching how Equifax calculate credit score are usually looking for a fixed formula. Equifax does not publish one.

How does Equifax determine credit score results in practice? It applies its own scoring model to the information held in your Equifax report at the time the score is requested.

That information can include repayment history, applications, defaults, account details, and public records.

Equifax uses a score range from 0 to 1,200. Its published bands are:

These categories give a broad indication of where the result sits. They are not approval thresholds that every lender follows.

Equifax also provides key contributing factors with its consumer score. These can help show which parts of the report may be influencing the result.

How an Experian Credit Score Is Calculated

The answer to how an Experian credit score is calculated is similar in principle, but Experian uses its own model.

Experian describes its score as a snapshot of the strengths and weaknesses in the Experian credit report. It considers financial and behavioural information and identifies payment history as an important influence.

The Experian score ranges from 0 to 1,000 in Australia. Their old model was scored from 0 to 1,200. Experian provides no updated rating ranges for their new 0 to 1,000 model, but for their old model, Experian grouped its scores into these bands:

An Experian score of 700 and an Equifax score of 700 should not be treated as identical. The two companies use different bands and different calculation methods.

Why Your Equifax and Experian Scores May Differ

Different scores do not automatically mean that one of them is wrong.

Equifax and Experian use separate models. Even where the underlying information is similar, each model may reach a different result.

They may also hold different information.

A lender can report an account to one credit reporting body, several bodies, or all major bodies. Updates may also reach each company at a different time.

One report might show that a card has been closed while another still lists it as open. A new repayment update or enquiry may first appear in one file.

An error can also cause a difference. One report may contain an account, late payment or enquiry that does not appear in the other.

Experian confirms that credit reporting bodies use their own methods, which is why scores can differ.

The best way to understand the gap is to compare the reports themselves, rather than looking at the two numbers in isolation.

Credit Score and Credit Report: What Is the Difference?

A credit report contains the information about your credit history.

The credit score is a number calculated from that information.

A score of 620 does not tell you whether the main issue is a default, a group of recent applications, or missed repayments.

The report provides that detail.

This distinction matters when deciding what to do next. Trying to raise the number without reading the underlying report can lead to unnecessary applications or account changes.

Moneysmart states that Australians can request a free copy of their credit report every three months.

What Is a FICO Score and How Is It Calculated?

What is a FICO score? It is a credit risk score developed by FICO and used widely in the United States.

Standard US FICO scores commonly range from 300 to 850. FICO models consider payment history, amounts owed, length of credit history, new credit, and the types of accounts held.

People asking how is a FICO score calculated often find a percentage breakdown on American finance websites.

Those percentages relate to FICO models. They should not be used as the formula for Equifax or Experian Australia.

FICO also produces several versions of its score. A mortgage lender may use a different version from a credit card provider.

Australian consumers see scores provided by either Equifax or Experian. A lender may also produce its own internal application score.

How Do Mortgage Lenders Determine Credit Score and Risk?

The phrase how do mortgage lenders determine credit score can be misleading.

A mortgage lender may obtain a score from Equifax, Experian or another reporting body. It may then run the application through its own assessment process.

The lender is deciding whether the proposed loan meets its policy and whether the applicant appears able to repay it.

It may consider the credit score, full credit report, income, living expenses, existing debts, dependants, deposit, employment and account conduct.

Mortgage lenders also assess serviceability.

APRA requires banks to apply a serviceability buffer of at least three percentage points above the loan interest rate. This tests whether the borrower could still meet repayments if rates or expenses increased.

Since February 2026, APRA has also required banks to limit the share of new mortgage lending with a debt-to-income ratio of six or higher. This is a portfolio limit for banks, rather than an automatic rejection rule for every borrower.

A good credit score cannot make an unaffordable loan affordable. A lower score does not always lead to an immediate decline either.

The lender may look at what caused the score, how old the issue is, and whether the applicant’s position has improved.

Does income affect your credit score?

Income is generally assessed by the lender rather than used directly in a standard Equifax or Experian consumer score.

A pay rise does not automatically raise the score. A loss of income does not automatically reduce it.

Income can have an indirect effect if reduced earnings lead to missed payments, arrears or further credit applications.

Does your savings balance affect your score?

Your normal savings balance is not usually recorded in a consumer credit report.

A home loan provider may still examine bank statements, savings history, spending and account conduct.

Those details may influence the application without changing your Equifax or Experian score.

Does Paying Off Debt Improve Your Credit Score?

It may, but the result cannot be predicted accurately.

Paying down debt can reduce financial pressure and lower your existing commitments. It may also prevent future late payments.

The score may change after the account balance or status is updated. The result depends on the type of debt and the rest of the report.

Paying a default does not remove it. The listing should be updated as paid, but an accurate default can generally remain for five years.

Clearing debt can still strengthen a loan application because it may improve cash flow and serviceability, even when the score changes very little.

How Can You Improve the Information Used in Your Score?

Start by checking the reports rather than watching the score alone.

Obtain copies from the major reporting bodies and confirm that every account belongs to you. Check repayment records, limits, application dates and account status.

Pay accounts by the due date. Payment reminders or direct debits can help avoid simple mistakes.

Try to limit formal credit applications. Research the provider’s likely requirements before allowing it to assess your file.

Review unused cards and excessive limits, particularly before applying for a home loan.

Contact the lender early if repayments become difficult. Waiting until the account is seriously overdue can reduce the options available.

You also have the right to ask for incorrect information to be fixed. Moneysmart notes that errors can be corrected for free and that you can arrange the correction yourself.

Credit Wipe’s guide to fixing errors on a credit report explains what to look for and how a correction request may proceed.

How Are Company Credit Ratings Calculated?

How to calculate the credit rating of a company is a separate question from personal consumer scoring.

A business credit assessment may consider payment history, trade accounts, defaults, court action, directors, company age and insolvency records.

A lender may also review tax returns, financial statements, revenue, liabilities, profit and cash flow.

Large companies can receive ratings from agencies such as Moody’s, Fitch or S&P Global Ratings. These ratings assess the organisation’s ability to meet its financial obligations.

There is no single answer to how credit ratings are calculated for every business. The method depends on the reporting agency, the lender, and the type of finance being assessed.

A company rating should not be confused with an Equifax or Experian consumer score.

How Credit Wipe Australia May Be Able to Help

A low credit score does not mean that every negative entry can be removed.

Accurate information may remain for the period allowed under Australian credit reporting rules.

A review may be appropriate when an entry appears inaccurate, duplicated, out of date, incomplete or linked to another person. There may also be an issue if the required reporting process was not followed.

Credit Wipe Australia can assess credit reports and investigate eligible defaults, enquiries, repayment history information and court judgements.

The outcome depends on the facts. A review cannot guarantee removal, a set score increase or finance approval.

You can request a free credit report assessment to find out what appears in your reports and whether an entry may warrant investigation.