Your credit score doesn’t just determine whether you can get a car loan. It also affects how much you can borrow and what interest rate you’ll be charged. A good credit score can make the process quick and stress-free. While a lower score may mean limited loan options or higher costs.
Understanding how your credit score works — and how to improve it — can make all the difference when applying for car finance in Australia.
What Is a Credit Score?
A credit score is a number that reflects your creditworthiness based on your borrowing history. Lenders use it to assess how likely you are to repay a loan on time. A higher score signals lower risk to lenders, increasing your chances of approval and securing a better interest rate.
In Australia, credit reporting agencies like Equifax, Illion, and Experian calculate your score based on factors such as repayment history, credit limits, and the number of loan applications you’ve made.
Equifax scores range from 0 to 1,200 and are categorised as follows:
- Excellent (853–1,200)
- Very Good (735–852)
- Good (661–734)
- Fair (460–660)
- Poor (0–459)
Note: Scoring bands and ranges can differ slightly between credit agencies.
What’s the Average Credit Score in Australia?
As of the latest Equifax Australian Credit Scorecard, the average credit score in Australia sits around 846. This places the average Aussie in the “Very Good” category.
You can check your credit score for free through credit reporting agencies such as Equifax, Illion, or Experian.
How Does My Credit Score Affect My Car Loan?
Your credit score plays a major role in:
1. Loan Approval
Lenders assess your credit score to determine how risky it is to lend to you. A higher score increases your chances of being approved for car loans, while a lower score may result in loan rejection — especially for secured loans or larger amounts.
2. Interest Rates
Lenders often apply “rate for risk” pricing — meaning the lower your credit score, the higher your interest rate is likely to be. A strong credit profile signals less risk, unlocking access to lower interest rates.
3. Loan Amount and Terms
A strong credit history may qualify you for higher borrowing limits and more flexible loan terms, including longer repayment periods and lower fees.
6 Tips to Improve Your Credit Score in Australia
Improving your credit score takes time, but the effort can pay off in the form of better loan options and lower rates. Here’s how to get started:
- Pay Bills and Loans on Time
Set up automatic payments to ensure all bills, credit cards, and loans are paid before the due date. Even one late payment can negatively impact your score. - Reduce Unnecessary Credit Cards
Close unused accounts to simplify your finances and reduce the temptation to overspend. - Lower Your Credit Limits
Reducing credit card limits can improve your credit utilisation ratio — a key factor in your score. - Avoid Excessive Credit Applications
Each loan or credit card application triggers a credit enquiry. Multiple enquiries in a short period can harm your score. Use a reputable finance broker to avoid unnecessary hits to your credit file. - Check Your Credit Report Regularly
Monitor your report for errors or signs of fraud. Incorrect listings and identity theft can drag down your score if left unaddressed. - Build a Positive Credit History
If you’re just starting out, consider a small loan or a low-limit credit card and manage it responsibly. This will help establish a good credit profile over time.
Tip: Items on your credit report generally remain for 2 to 5 years, depending on the type of listing.
What’s the Best Way to Apply for a Car Loan?
Working with a reputable finance broker, such as AAA Finance, is often the smartest move when applying for a car loan. Here’s why:
- Access to Multiple Lenders
Brokers compare dozens of lenders — including specialist and non-bank lenders — to find the best fit for your credit profile and financial situation. - Stronger Loan Applications
Brokers know how to structure and present your application to improve your chances of approval. - Better Rates and Terms
Brokers often negotiate better deals thanks to their industry knowledge and volume-based relationships with lenders. - Protect Your Credit Score
Unlike dealerships or online lenders who may submit multiple applications, brokers carefully match you with the right lender from the outset — avoiding unnecessary credit enquiries.
Finance Solutions for Wage Earners, the Self-Employed, and Business Owners
At AAA Finance, we understand that every client’s financial situation is different. Whether you’re a wage earner, self-employed, or a business owner, we tailor car finance solutions to suit your unique needs. Our experienced brokers specialise in everything from standard secured car loans to low doc vehicle loans and business vehicle finance, helping you access competitive rates with minimal fuss. With access to a wide panel of lenders, we take the stress out of finding the right loan — so you can drive away sooner, with confidence.
What About Banks and Dealerships?
- Dealership Finance: Usually limited to 1–2 lenders. If you don’t meet their strict criteria, your loan may be declined — negatively affecting your credit file.
- Direct to Banks: You’re limited to that bank’s loan products. Some don’t offer secured car loans, so you might be stuck with a higher-interest personal loan instead.
Final Thoughts
Understanding how your credit score impacts car loans puts you in the driver’s seat. With the right habits and support from a trusted AAA Finance broker, you can improve your score and access competitive finance tailored to your situation.
About the Author
Peter Watman is the founder of AAA Finance and Insurance and has over 30 years’ experience in the finance and automotive industries. Since 2012, Peter has led a dedicated team focused on delivering quick, easy finance solutions and outstanding customer service to clients across Australia.
