Your credit score plays a crucial role in securing a home loan, car loan, or even a credit card. But what exactly is it, and how can you improve it?

what is a credit score?

A credit score is a numerical rating that represents your creditworthiness – essentially, how reliable you are at repaying debt. Lenders use this score to assess how likely you are to repay loans. Credit scores typically range from:

• 0 to 1,000 (sometimes up to 1,200)
• 690+ is excellent, and 540+ is good (on a 1,000-point scale)
• Higher scores improve your chances of loan approval and better interest rates.

You can check your credit score for free at creditsmart.org.au and it’s recommended to review it annually.

does not having a credit card affect my score?

Many young doctors worry that having no credit history (e.g., no credit card or previous loans) may impact their borrowing ability. While not having debt is great, lenders prefer to see a track record of responsible borrowing.

A well-managed credit card, paid off on time, can actually improve your credit score over time.

how to improve your credit score

Building and maintaining a strong credit score takes time, but here’s what you can do:

1.     start early

• The sooner you establish a reliable payment history, the better.
• Even if you’ve applied for no credit in the last 12 months, the fact that your loans had another 12 month term and you’ve made repayments on time, that in itself is improving your score

2.     pay your bills on time

• Late payments negatively impact your credit score, especially if overdue by weeks or months
• Even if you have no new loans, simply paying existing debts on time improves your score.

3.     check your credit report regularly

• Errors or forgotten debts (e.g., an old phone bill) can lower your score without you realising it
• Reviewing your report ensures accuracy and allows you to fix any mistakes.

4.     avoid excessive credit applications

• Applying for multiple credit cards or loans in a short time can signal financial instability
• Lenders see this as a red flag, potentially lowering your score.

5.     maintain a stable residential address

• Frequent address changes (especially every 12 months or less) can negatively impact your score
• While unavoidable for doctors on short-term contracts, consider keeping a permanent mailing address.

6.     manage credit responsibly

• Holding and regularly repaying one or two credit cards helps more than having none
• Keeping credit utilisation low (not maxing out cards) also boosts your score.

how do banks use your credit score?

When you apply for a loan, banks automatically perform a credit check. Key factors they look at include:

• Stability: long-term residence and employment history
• Credit history: consistent, timely payments over the past 24 months matter most
• Total credit exposure: too many loans or credit cards can be a warning sign.

A strong credit score can open doors to better loan options and interest rates. Some banks even have exclusive policies for borrowers with higher credit scores.

what happens if you have a bad credit score?

If you have defaults (e.g., unpaid phone bills), they remain on your credit report for five years. However, mistakes can be explained to lenders, and a strong history of on-time payments will gradually improve your score.

Beware of companies promising ‘quick fixes’ for bad credit – they are often scams. The only way to improve your score is through consistent, responsible financial behavior over time.

to maintain a strong credit score:

• Pay bills on time
• Check your credit report annually
• Avoid unnecessary credit applications
• Keep a stable address where possible
• Use credit cards responsibly.

final thoughts

Your credit score isn’t just a number – it directly affects your ability to secure loans and financial products. By taking steps, you can set yourself up for better financial opportunities and a stronger borrowing position in the future.

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For further information or to book a complimentary meeting, please phone 03 9863 311, visit bongiorno.com.au or email enquiry@bongiorno.com.au

Mark Bremner |senior finance consultant
Ricky Caldow BCom (Acc/FinPlan), Cert.IV FMB, GAICD |director

As this general advice has been prepared without taking account of your objectives, financial situation or needs, you should consider the appropriateness of this advice before acting on it. If this general advice relates to acquiring a financial product, you should obtain a Product Disclosure Statement before deciding to acquire the product.