Buying a car is one of the biggest financial decisions most Australians make, and for the majority of us, that means taking out a loan. But before you start browsing dealerships or comparing interest rates, your credit score is one of the first things a lender will look at. So what score do you actually need, and what happens if yours is not where you want it to be?
This guide breaks it all down in plain language.
Understanding Credit Scores in Australia
In Australia, your credit score is a number that reflects your history of borrowing and repaying money. Lenders use it to decide how risky it is to lend to you. The higher your score, the more confident a lender feels that you will repay on time.
There are three main credit reporting agencies in Australia, each using a slightly different scoring scale:
Equifax scores range from 0 to 1,200 and are broken down like this:
- Below 509: Below average
- 510 to 621: Average
- 622 to 725: Good
- 726 to 832: Very good
- 833 to 1,200: Excellent
Experian uses a scale of 0 to 1,000:
- 0 to 549: Below average
- 550 to 624: Fair
- 625 to 699: Good
- 700 to 799: Very good
- 800 to 1,000: Excellent
Illion (formerly Dun and Bradstreet) also scores from 0 to 1,000:
- 1 to 299: Low
- 300 to 499: Room for improvement
- 500 to 699: Average
- 700 to 799: Good
- 800 to 1,000: Excellent
Different lenders may use different bureaus, which is why your score can appear to vary depending on where you check it.
What Credit Score Do You Need for a Car Loan?
There is no single universal minimum credit score required for a car loan in Australia. Each lender sets its own criteria. However, as a general guide:
Good to excellent credit (622+ on Equifax / 625+ on Experian): You are in the best position to access competitive interest rates and flexible loan terms. Most mainstream banks and credit unions will welcome your application.
Average credit (510 to 621 on Equifax): You may still be approved, but you could face higher interest rates or stricter conditions. Some lenders may require a larger deposit or a shorter loan term.
Below average credit (below 510 on Equifax): Mainstream lenders are likely to decline your application. However, specialist or non-conforming lenders do cater to borrowers in this range, though at significantly higher rates.
It is worth noting that your credit score is just one piece of the puzzle. Lenders will also look at your income, employment stability, existing debts, and living expenses when assessing your application.
How Car Loans Work in Australia
A car loan is a type of secured personal loan where the vehicle acts as collateral. This means if you default on repayments, the lender can repossess the car. Because of this security, car loans tend to have lower interest rates than unsecured personal loans.
When comparing car loans, you will generally come across two main types:
Secured car loans: The loan is tied to the vehicle. These offer lower interest rates and are the most common option for purchasing a car.
Unsecured car loans: No asset is used as security. These carry higher rates and are typically used for older vehicles that lenders will not accept as collateral.
Loan terms in Australia typically range from one to seven years, and interest rates can vary significantly between lenders. This is why shopping around and comparing options is so important before committing to anything.
What Affects Your Credit Score?
If your score is not where you would like it to, understand what influences it can help you take action.
Repayment history: This is the biggest factor. Paying bills and loans on time consistently has a positive effect. Missed or late payments, on the other hand, can drag your score down considerably.
Credit enquiries: Every time you apply for credit, whether it is a credit card, personal loan, or home loan, a hard enquiry is recorded on your file. Too many enquiries in a short period can signal financial stress to lenders.
Credit utilisation: How much of your available credit you are using matters. Maxing out credit cards repeatedly can hurt your score even if you pay them off each month.
Defaults and judgements: Serious credit events like defaults, court judgements, or bankruptcy have a significant negative impact and can remain on your credit file for up to seven years.
Positive credit history: Under Australia’s comprehensive credit reporting system, introduced more broadly from 2018, lenders can also see positive repayment data. Making consistent on-time repayments actively builds your score.
How to Check Your Credit Score for Free
You are entitled to a free copy of your credit report from each of the three bureaus once every three months. You can request one from:
- Equifax: equifax.com.au
- Experian: experian.com.au
- Illion: illion.com.au
Several financial apps and comparison sites in Australia also offer free credit score checks, including Credit Savvy and CreditSimple. Checking your own score does not affect it.
According to ASIC’s MoneySmart, reviewing your credit report before applying for a loan gives you the chance to spot any errors and dispute them before a lender sees them.
Tips to Improve Your Credit Score Before Applying
If your score needs work, you do not have to wait forever to buy a car. With some targeted effort, you can improve your position within a few months.
Pay everything on time: Set up automatic payments for bills, credit cards, and any existing loans. Even one missed payment can set you back.
Reduce your credit card balances: Aim to keep utilisation below 30% of your credit limit across all cards.
Avoid multiple applications at once: Each application leaves a mark on your file. Do your research first and only apply when you are confident about the product.
Close unused credit accounts: Having too many open credit lines, even if they are not being used, can raise concerns for some lenders.
Check for errors on your report: Incorrect defaults or accounts you do not recognise can seriously damage your score. You have the right to dispute inaccurate information with the credit bureau.
Give it time: Positive behaviour compounds. If you can wait three to six months before applying, consistent good habits will have a measurable impact.
What If You Have a Low Credit Score?
A low credit score does not automatically mean you cannot get a car loan in Australia. It does mean you need to approach it differently.
Specialist lenders: Some lenders specifically work with borrowers who have impaired credit histories. They take a more holistic view of your financial situation. The trade-off is higher interest rates and fees.
Guarantor loans: If a family member with strong credit is willing to act as a guarantor, this can significantly improve your chances of approval and the rate you receive.
Larger deposit: Offering a bigger deposit reduces the lender’s risk and can tip the balance in your favour.
Buy a less expensive car: Applying for a smaller loan amount reduces your repayment burden and makes approval more likely.
Even if you do qualify through a specialist lender, it is worth running the numbers on what the total repayment will be over the full loan term. Higher interest rates on a longer loan can add up considerably, and tools available on LoanCalculator.com.au make it straightforward to compare scenarios before you commit to anything.
Final Thoughts
Your credit score is one of the most important factors in getting approved for a car loan in Australia and it has a direct impact on the interest rate you will be offered. Borrowers with a good to excellent score are in the strongest position, but even those with average or below-average credit have options.
The key is to know where you stand before you apply, take steps to improve your score if time allows, and compare your options carefully. Understanding the full picture, not just the monthly repayment, will help you make a decision that works for your finances both now and into the future.