Quick answer
In Australia, credit reporting bodies keep credit files on individuals and on companies and businesses. Lenders use these files, and scores calculated from them, to assess risk. For small businesses, the directors' or owner's personal credit file often matters as much as the business's. Defaults, court judgments, insolvency, late payments and frequent credit applications lower scores, while on-time repayments and stable details help.
Key points
- There are personal credit files and commercial credit files.
- Small business lenders usually check both.
- Each credit reporting body calculates its own score.
- You can access your personal credit report free and correct errors.
Checklist
- Personal credit report obtained
- Company credit file checked
- Errors identified and disputed
- Outstanding defaults addressed
- Recent enquiries reviewed
When you apply for business finance, one of the first things a lender does is look at credit files: yours and, if you have one, your company’s. Understanding what is in those files, how scores are calculated and what you can do about them puts you in a stronger position before you apply.
Two kinds of credit file
Personal (consumer) credit files record your history with consumer credit such as credit cards, personal loans, home loans and some utility and telco accounts, along with defaults, court judgments, bankruptcy and credit enquiries. Under comprehensive credit reporting, they can also show repayment history on many accounts.
Commercial credit files record information about companies and businesses, such as company details, commercial credit enquiries, defaults reported by trade creditors, court actions and insolvency events.
For small businesses, especially sole traders and companies with director guarantees, lenders usually look at both. The OAIC’s credit reporting page explains your rights under the personal credit reporting system.
What a credit score is
A credit score is a number calculated by a credit reporting body from the information in your file, designed to estimate the likelihood of future credit problems. Different reporting bodies calculate scores differently, so your score may vary between them. Lenders may use a bureau score, their own scoring model or both.
What lowers a score
| Factor | Why it matters |
|---|---|
| Defaults | Unpaid overdue debts reported by creditors |
| Court judgments | Legal action for unpaid debts |
| Insolvency | Bankruptcy, personal insolvency agreements, company administration |
| Late repayments | Shown in repayment history information |
| Many recent enquiries | Can suggest financial stress or credit shopping |
| Frequent changes of address or details | Can reduce confidence in data accuracy |
What helps
- Repaying every account on time.
- Fewer, well-targeted credit applications.
- Paying or settling outstanding defaults.
- Keeping details accurate and consistent.
- Separating business and personal credit where possible.
How to check your files
Request your personal credit report from the credit reporting bodies; access is free in certain circumstances, as the OAIC explains. For a company, you can purchase a commercial credit report. Check every entry: is the debt yours, is the amount right, is the status current? Mistakes happen, particularly with similar names or old addresses.
Disputing errors
If something is wrong, contact the credit reporting body or the credit provider that listed it and ask for a correction, with evidence. They must investigate. If you are not satisfied, the OAIC explains the further steps available.
Credit enquiries and shopping around
Each application for credit typically creates an enquiry on your file. Several in a short period can concern lenders. That is why it pays to research and get informed before formally applying, and why our first step is an enquiry that does not involve a credit check.
How lenders use your file in practice
A lender rarely declines on a score alone. It looks at the story: what happened, when, how serious, whether it is resolved and how you have behaved since. A clean recent record with an old, paid default reads very differently from a fresh unpaid one. Our guides to defaults and business finance and comprehensive credit reporting go further.
An illustrative example
A made-up café owner is surprised by a decline. Checking her personal report, she finds a telco default she never knew about from an old address. She contacts the telco, discovers an unpaid final bill, pays it and asks for the listing to be updated. She also disputes a second entry that belongs to someone with a similar name, which is removed. Her next application is approved.
Business credit and personal credit together
For companies, the directors’ personal files and the company’s commercial file tell different parts of the same story. A clean company file with a director whose personal file shows recent defaults may still concern a lender, because the director’s habits shape how the company is run. Equally, a director with a spotless personal record may find the company’s file includes a trade creditor default that needs explaining. Check both before you apply so there are no surprises.
Protecting your score while you build the business
- Pay suppliers on agreed terms; trade creditors can report defaults on commercial files.
- Keep business and personal borrowing separate where possible.
- Avoid applying for several facilities at once.
- Respond quickly to any overdue notice, even for small amounts, before it becomes a listing.
- Keep your registered address and ASIC details current so notices reach you.
Scores are not the whole picture
Lenders that lend to small businesses every day know that a score is a summary, not a verdict. Recent bank statement conduct, security, time in business and a clear purpose can outweigh a modest score. That is why it is worth presenting the full picture rather than assuming a lower score rules you out.
Find out where you stand without a credit check
If you are unsure how your credit history will be viewed, make one enquiry. There is no credit check when you first enquire, a real person reviews it and your details go to one lending partner rather than a crowd. Select your credit history honestly in the form, including Below Average or Poor, so your enquiry is matched to realistic options.
Frequently asked questions
Does my business have its own credit score?
Companies and some businesses have commercial credit files with credit reporting bodies, which may include scores. Sole traders are assessed mainly on their personal credit files.
Do lenders check my personal credit for a business loan?
Usually yes, especially for small businesses where directors give personal guarantees. Your personal history is a strong signal of how the business is run.
How do I get my credit report?
You are entitled to access your personal credit report from credit reporting bodies free of charge in certain circumstances. The OAIC explains how credit reporting and access work.
How long do defaults stay on a credit file?
Default information is generally kept on a consumer credit file for a set period under the credit reporting rules, often five years. The OAIC explains retention periods.
Does checking my own credit score hurt it?
No. Accessing your own report is not a credit enquiry by a lender and does not affect your score.
Can I remove a correct default?
Accurate information generally cannot be removed early, but paying it can update its status. Incorrect information can be disputed and corrected.
Will a business loan help build my credit history?
Repaying a business loan on time can support your record, particularly on commercial files and, where a facility is reported, on personal files. The key is consistent on-time repayment over the life of the loan.
Sources and further reading
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