DMC Finance

Understanding Credit Scores and Tips to Improve Them

In today’s financial landscape, your credit score is a crucial number that can significantly impact your ability to secure loans, credit cards, and even rental agreements. At DMC Finance, we believe in empowering our clients with knowledge to help them achieve their financial goals. In this article, we’ll explain how credit scores are calculated and provide actionable tips to improve them.

How Credit Scores Are Calculated

Credit scores in Australia, often ranging from 0 to 1,200, are calculated by credit reporting agencies such as Equifax, Experian, and Illion. These scores reflect your creditworthiness and are determined based on the following factors:

  1. Payment History
    • Your track record of paying bills on time is a crucial component. Late payments, defaults, and debts in collections will negatively impact your score.
  2. Credit Utilisation
    • This refers to the amount of credit you’re using compared to your available credit limit. Keeping your credit utilisation ratio low is vital for a good score.
  3. Length of Credit History
    • The age of your credit accounts plays a role. A longer credit history generally contributes to a higher score.
  4. Types of Credit
    • Having a mix of credit types, such as credit cards, personal loans, and mortgages, can positively affect your score.
  5. Credit Enquiries
    • Each time you apply for credit, a credit enquiry is recorded on your report. Frequent credit enquiries can lower your score, as they might indicate financial distress or increased risk.

Tips to Improve Your Credit Score

Improving your credit score can open doors to better financial opportunities. Here are some practical tips to help boost your score:

  1. Pay Your Bills on Time
    • Consistently paying your bills on time is the single most effective way to improve your credit score. Set up payment reminders or automatic payments to ensure you never miss a due date.
  2. Avoid Opening New Accounts Frequently
    • Each new credit application results in a hard enquiry on your credit report, which can lower your score. Be strategic about applying for new credit and avoid opening multiple accounts in a short span.
  3. Check Your Credit Report Regularly
    • Obtain a free copy of your credit report from each of the major credit bureaus (Equifax, Experian, and illion) annually. Review the reports for any errors or inaccuracies and dispute them if necessary.
  4. Maintain Old Accounts
    • The age of your credit accounts contributes to your credit score. Even if you no longer use an old credit card, keep the account open to benefit from the length of credit history.
  5. Diversify Your Credit Mix
    • If you only have credit cards, consider diversifying your credit portfolio with a small personal loan or a car loan. A mix of different types of credit can positively impact your score.
  6. Limit Hard Enquiries
    • Hard enquiries occur when a lender checks your credit report for lending decisions. Too many hard enquiries can lower your score, so be mindful of how often you apply for credit.
  7. Use Credit Monitoring Services
    • Credit monitoring services can help you keep track of your credit score and alert you to any significant changes or potential fraud. Some services also offer tips on how to improve your score.


Understanding how credit scores are calculated and taking steps to improve them can lead to better financial health and more opportunities. By focusing on timely payments, reducing debt, and maintaining a good credit history, you can achieve a higher credit score. At DMC Finance, we are committed to helping you navigate your financial journey with confidence and ease.

DMC Finance has access to specialist credit repair companies such as Credit Success that can assist with potential removal of defaults and late payments. This can result in a higher credit score which in turn, will assist with your loan application.

For more tips on managing your credit, contact DMC Finance today.