Quick answer
Improve your credit score by correcting errors, paying every bill on time, reducing balances and limits, and limiting new applications. Moneysmart names borrowing, applications and on-time payment as the factors. Repayment history is held for two years, while defaults and enquiries stay five, so steady conduct over months does most of the work.
Key points
- Start with your free reports from Equifax and Experian, and correct anything wrong.
- Paying on time is a named score factor; a missed payment is one not made within 14 days.
- Paying a default does not remove it, but it then shows as paid.
- Repayment history is held for two years; defaults and enquiries for five.
- Hardship arrangements do not affect your score and are removed after 12 months.
Can a credit score really be improved?
Yes, though how much and how quickly depends on what is holding it down. A score is a summary of your credit report. Change what is on the report, or let time pass while clean conduct builds up, and the score tends to follow. There is no shortcut that skips the process, but there is a clear one.
Moneysmart describes the factors behind a score as the amount you have borrowed, the number of credit applications you have made and whether you pay on time. That gives you three levers, and each one is within your control to some degree.
What should I do first?
Get the facts. Order your credit report from both Equifax and Experian, which Moneysmart says may hold different information. The OAIC explains you can have a free copy every three months, and our guide on getting your free credit report shows how to ask.
Read it line by line. Check that every account is yours and the personal details are right. Make a short list of anything wrong, anything overdue and any listing you want to understand better. That list is your plan.
How do I fix errors?
Contact the credit reporting body, describe the mistake and send evidence. Moneysmart says this is free, and that only incorrect information can be removed. Typical wins include a debt listed as unpaid after settlement, a duplicated account or an entry that belongs to someone else.
Be wary of anyone who offers to clean your file for a fee. Moneysmart warns against providers that charge or ask for card details, because you can raise the correction yourself. After a correction, the OAIC notes you can request a fresh free copy to confirm it took effect.
How does on-time repayment lift a score?
Moneysmart says credit products and repayment history cover the last two years, and that a missed payment is one not made within 14 days of the due date. That is the window in which your habits show.
To build a clean run:
- Move every repayment to automatic debit for at least the minimum.
- Pay slightly more than the minimum where you can.
- Keep a buffer in the debit account.
- Check each month that every payment cleared.
A year of tidy months does more than any single trick. Lenders reading your file see a pattern, and patterns carry weight.
What do I do about existing defaults?
Pay what you can and get written confirmation. Moneysmart says paying a default does not remove it, but the report will show it as paid, and that defaults stay for five years. The OAIC lists the same five-year period.
Think of a paid default as a closed chapter rather than a deleted one. Some lenders will consider an applicant with a paid default where the cause is clear and conduct since has been clean. Our guide on getting a home loan with bad credit covers how that works in practice.
What about hardship and arrears?
If money is tight, talk to the lender early. Moneysmart says a financial hardship arrangement does not affect your credit score, shows only the months it was in place and is removed after 12 months. If you keep to it, you are shown as up to date.
That is a more favourable outcome than letting payments lapse. For borrowers whose arrears relate to a home loan, our page on mortgage arrears help outlines the wider options.
How should I handle limits and balances?
The amount borrowed is a score factor, and lenders often assess limits as if they were fully used. So:
- Pay down card balances before smaller instalment debts if you can.
- Reduce limits you do not need.
- Avoid carrying several small debts at once.
- Consider whether a single structured facility would simplify things.
If many debts are the issue, consolidation can sometimes help, though it needs care. Our page on secured debt consolidation and the guide on consolidating debts with a second mortgage explain the trade-offs honestly.
How many new applications are too many?
Moneysmart lists the number of applications as a factor, and the OAIC says enquiries stay for five years. The simple answer is to apply only when you have a good reason to expect the lender will say yes. Our guide on why applying everywhere backfires explains the logic.
In practice, that means pausing casual applications while you rebuild. Comparing products and using calculators does not create an enquiry, so you can still plan without adding to your file.
What timeline is realistic?
| Timeframe | What you can usually achieve |
|---|---|
| This week | Order reports, spot errors, set automatic payments |
| This month | Lodge corrections, pay small debts, cut unused limits |
| 3 to 6 months | Build a visible run of on-time payments |
| 12 months | A cleaner two-year window and less pressure from older issues |
| Up to 5 years | Defaults and enquiries age off their listing periods |
These are broad, not guarantees. Your own file may move faster or slower, depending on what is on it.
Can I see an illustrative example?
This is illustrative only and not a real person. A couple wants to buy in about eighteen months. They order reports and find an old phone account listed as a default that was settled years ago. They send the settlement letter, and the body corrects it. They also close two cards they rarely use and automate every repayment.
Over the next year they avoid new applications and keep balances low. When they approach a broker, the file shows a corrected record, lower limits and a long run of on-time payments. Their loan readiness is far stronger than when they started, with nothing promised but a better footing.
What mistakes should I avoid?
- Paying for a credit fix. Only wrong information can be removed, and the correction is free.
- Opening new credit to build history. It adds enquiries and borrowing.
- Missing the small stuff. Defaults can arise from small overdue bills.
- Expecting overnight change. Listings age at their own pace.
- Hiding history from your broker. Lenders will see it anyway.
When is it better to apply now?
Sometimes waiting is wise and sometimes it is not. If your issues are modest and your documents are strong, an application with a suitable lender may be possible now. If the file has a recent default or arrears, a few months of repair might open more doors. Specialist options exist for people who cannot wait. Our page on bad credit home loans explains how we approach them.
A broker can tell you which situation you are in after reading your file. Bring your reports, your list of debts and a note on the timing. You can begin on our apply page or call 03 7043 7233, and Trevor Scott’s team will give you a straight answer.
Ready to turn a stronger file into a loan?
Sounds like you’re looking to get a loan, and you are working on the credit file behind it. We’re the lending experts in matching your history, good or bumpy, to the right lender, so click here to see if you qualify. We will look at what is available for your situation and be honest about timing.
Frequently asked questions
How long does it take to improve a credit score?
It depends on the cause. Correcting an error can be quick. Repayment history covers two years, per Moneysmart, so a run of on-time payments builds steadily. Defaults and enquiries stay for five years according to the OAIC, though recent clean conduct generally counts for more. Expect months rather than days.
Does paying off a default fix my credit score?
Paying it helps your position, but Moneysmart says a default stays on your report for five years even after it is paid. The listing then shows as paid, which reads better than an unpaid one. Pay what you can and keep a record of the settlement letter in case you need to prove it.
Should I close my credit cards?
Sometimes. Lenders often count the card limit as a commitment whether or not you use it, so cutting limits you do not need can help borrowing power. The effect varies, and closing your oldest card may shorten your visible history. Talk to a broker before closing anything ahead of an application.
Can I improve my score by taking out a small loan?
Borrowing just to build history is not a reliable strategy, and each application adds an enquiry. Moneysmart lists the number of applications and amount borrowed as score factors. Consistent on-time payment on credit you already have is a safer foundation than adding new accounts.
Can anyone remove accurate negative information?
No. Moneysmart says only incorrect information can be removed, and that you can ask for a correction yourself for free. It advises avoiding credit repair providers that charge or request card details. Accurate listings age off after their set period, which the OAIC publishes.