The Young Australian's Guide to Credit & Debt

Your credit score is a number — typically between 0 and 1,200 depending on the bureau — that lenders use to assess how risky it is to lend you money. A higher score means lower risk, which means better loan terms, lower interest rates, and easier approvals. A low score can mean rejections, higher rates, or having to use a guarantor.

Australia has three credit bureaus: Equifax, Experian, and illion. Each calculates your score slightly differently, and lenders may check one or all three. You're entitled to a free copy of your credit report from each bureau once every three months — and checking your own report does not affect your score.

Since 2018, Australia moved to comprehensive credit reporting (CCR), which changed things significantly. Previously, your report only showed negative events — defaults, late payments, court judgments. Now it also shows positive behaviour: whether you pay on time every month, your credit limits, and how long you've held accounts. This means consistent on-time payments actively build your score, not just avoid damaging it.

• Payment history — the biggest factor. Even one missed payment can drop your score noticeably. Paying on time, every time, is the single most important thing you can do.
• Credit enquiries — every time you apply for credit (a loan, credit card, phone plan on a contract), a hard enquiry is recorded. Multiple enquiries in a short period signal financial stress and drag your score down.
• Credit utilisation — how much of your available credit you're using. Using 80% of a $5,000 credit limit looks worse than using 20%. Keeping utilisation under 30% is the general rule.
• Length of credit history — older accounts with good history help your score. Closing your oldest credit card can actually hurt it.
• Types of credit — a mix of credit types (card, personal loan, mortgage) shows you can manage different products responsibly.

A credit card is a tool. Like most tools, it can be useful or dangerous depending on how you use it. Used well, a credit card gives you up to 55 interest-free days on purchases, builds your credit history, and often comes with rewards or purchase protections. Used poorly, it charges you 20%+ interest per year and traps you in a cycle that's hard to break.

The mechanics are straightforward but often misunderstood. When you make a purchase, you have an interest-free period — typically up to 44 or 55 days, depending on when in the statement cycle the purchase is made. If you pay your full closing balance by the due date each month, you pay zero interest. Ever. If you only pay the minimum, interest starts accruing immediately on the remaining balance — and at 19–22% per year, it compounds fast.

• Always pay the full balance, not the minimum. Minimum repayments are designed to keep you in debt as long as possible. On a $3,000 balance at 20% interest, paying only the minimum can take over 10 years to clear.
• Set up a direct debit for the full closing balance. This removes the risk of forgetting. If you can't cover the full balance, you're spending more than you earn — the card is a symptom, not the cause.
• Don't use credit cards for cash advances. These have no interest-free period, attract higher interest rates immediately, and often carry a separate fee on top.
• Watch for BNPL interactions. Afterpay and Zip are not credit cards but they do appear on your credit file if you miss payments, and using a credit card to fund BNPL repayments compounds debt unnecessarily.