If you’re looking to apply for a mortgage or any other type of finance, there are a number of key financial indicators that lenders will assess to determine if you're a suitable candidate for a loan. A healthy credit score can make all the difference when you apply for a home loan, car loan or any form of credit. But what exactly is a credit score? And how can you strengthen it to improve your borrowing power? This guide will clarify the concept of a credit score, show you how to check it, discuss the impact of services like Afterpay, and provide four actionable strategies to enhance your credit score.

What Is A Credit Score?

Your credit score, sometimes referred to as a credit rating, is a number that represents your creditworthiness in the eyes of lenders. It’s based on your credit report, which includes personal and financial information including your borrowing history, repayment behaviour, number of credit applications and more. In Australia, credit scores generally range from 0 to 1,200, depending on the credit reporting agency.

A higher score suggests you’re a lower risk to lenders, increasing your chances of loan approval and potentially securing better interest rates and repayment terms.

How To Check Your Credit Score

Finding out what your current credit score is will help you avoid any potential problems when you’re looking for a loan as you have the opportunity to improve it before applying. You’re entitled to check your credit report for free once a year by contacting one of the reporting agencies in Australia such as Experian, Illion and Equifax. 

In fact, it’s a good habit to regularly check your report to stay informed about your financial health and to spot any errors or signs of identity theft that could harm your score. It’s important to remember that even if your credit score isn’t as high as you’d like it to be, there are some relatively simple things you can do to improve it. 

Does AfterPay Affect Your Credit Score?

Buy Now Pay Later (BNPL) products like AfterPay and ZipPay have become commonplace in Australia. They allow you to buy an item immediately and pay for it in installments over a set period of time. It’s become super easy for many people to access these services now as most providers partner with retailers so that BNPL is often offered as an option at the checkout when making online purchases.

One significant change that came into effect on 10th June 2025 is that BNPL providers are now also officially regulated under the National Consumer Credit Protection (NCCP) Act. This means that they’re treated like traditional lenders and must hold a credit licence. They must also adhere to stricter lending criteria such as verifying your financial situation. They will also be required to follow industry standards when it comes to credit reporting.

It’s also worth mentioning that Zip does conduct checks on your credit file when signing up new customers and with the introduction of the new regulations, AfterPay has started to do the same. 

So while using BNPL services in itself shouldn’t directly affect your credit score, having multiple accounts, missed payments or defaults that get escalated to debt collectors can make you look like a riskier loan prospect. 

Additionally, some lenders may view frequent BNPL use as a sign of poor money management, which could influence your loan application. It’s essential, if you’re using these services, to make payments on time and to stick to using one platform. 

What Else Impacts Your Credit Score?

The first thing to highlight here is that just checking your credit score doesn’t affect it. The other things that don’t impact your credit score are:

• Your income
• Your savings
• Your investments
• No. of dependents you have

Again it’s important to flag that the different credit reporting agencies use different criteria and weightings to determine your credit score but the main factors that go into determining your credit score include:

• How many credit accounts you have
• You credit limits
• Your repayment history
• Applying for a lot of new credit products
• Having loan applications rejected
• Court judgements

What Is A Good Credit Score?

In Australia, the credit reporting agencies use slightly different scores and thresholds for categorising credit scores. However, generally scores are shown on a scale of Excellent to Below Average broadly as follows:

The higher your score, the more likely you are to be approved for finance and receive favourable terms.

4 Ways To Improve Your Credit Score

The good news is that when it comes to how to improve your credit score, it all comes down to building sound financial habits. There are some relatively simple steps you can take to do this. 

1. Limit how many applications you make for credit
   Each time you apply for credit, it’s recorded on your file. Too many applications in a short period can lower your credit score.
2. Pay your bills on time
   Your payment history is one of the biggest factors affecting your score. Always pay bills like phone, electricity and utility bills by the due date to show you’re a responsible borrower.
3. Pay your loans and credit cards on time each month
   It’s also just as important to pay off at least the minimum on your loans and credit cards. If you’re able to pay off more than the minimum this shows that you’re in control of your debt and you can also reduce monthly interest charges
4. Lower your credit card limits
   If you have multiple credit cards, lenders consider the cumulative credit limits of those credit cards. So if you have $10,000 available on one credit card and $7,000 on another, you’re effectively seen as having $17,000 potential debt, regardless of whether you have spent up the limits.
        

While the vast majority of us have paid for something on credit or used a credit account at some point in our everyday lives, if you’re looking to get a personal loan for a home or a car, you can significantly improve your chances of approval by monitoring and managing your credit score. 

A healthy credit score is key to securing better loan options and interest rates. By following these practical tips, you’ll be on your way to improving your score and boosting your borrowing potential.

At Sapphire Finance Brokerage, we help you understand how your credit score impacts your finance options and provide guidance on how to improve your credit profile. Contact us today if you're looking to get a home loan or business finance.