What Credit Score Do You Need to Consolidate Debt in 2026?

Most people think you need a perfect credit score to consolidate debt. That’s not true. You don’t need an 800. You don’t even need a 700. But you do need something real - a score that tells lenders you’re not a gamble. In Australia, the average credit score for someone approved for a debt consolidation loan in 2025 was 650. That’s the number you should aim for. Not because it’s magic, but because it’s the line most lenders draw in the sand.

Why credit score matters for debt consolidation

What score do you actually need?

• Below 580: Very unlikely to get approved. If you do, you’ll pay over 20% interest - often more than what you’re paying now.
• 580-649: Possible approval, but high rates. Expect 14-19%. Only worth it if your current debts are at 20%+.
• 650-719: Good chance. Rates between 9-13%. This is where most people get approved. This is your sweet spot.
• 720+: Excellent. You’ll likely get rates under 9%. Some lenders offer 6-7% if you have a strong income and low debt-to-income ratio.

That 650 number? It’s not arbitrary. A 2025 study by the Australian Credit Council found that 72% of approved debt consolidation loans went to applicants with scores between 650 and 719. That’s the real target.

What if your score is below 600?

Some lenders offer secured debt consolidation loans. That means you put up something - like your car or equity in your home - as collateral. That lowers the risk for the lender, so they’ll accept a lower score. But if you miss payments, you lose the asset.

Another option: a credit union. They don’t rely on scores as heavily. They look at your whole picture - your job, how long you’ve lived in your home, your bank history. If you’ve been paying your bills on time for six months straight, even with a 560 score, they might work with you.

And don’t ignore free help. Non-profit agencies like Financial Counselling Australia offer free debt assessments. They can negotiate lower interest rates with your current creditors - no loan needed. Sometimes that’s smarter than taking on a new one.

Debt consolidation isn’t just about the score - it’s about the plan

If you keep using your credit cards after you consolidate, you’ll end up with the old debt and the new loan. That’s how people get trapped.

Successful consolidation means three things:

1. You close the credit cards you paid off.
2. You stick to a budget that leaves room for the new payment.
3. You don’t take on any new debt while paying it off.

One client in Brisbane had $28,000 in credit card debt at 19% interest. Her score was 620. She got a 12% consolidation loan. She closed her cards. She used a free budgeting app. In 18 months, she was debt-free. Not because she got a great score - because she changed her habits.

What else do lenders look at?

• Debt-to-income ratio: Your total monthly debt payments divided by your gross monthly income. Anything over 40% makes approval harder.
• Stable income: Are you employed? Self-employed? Have you been in the same job for 12+ months? Lenders want proof you can keep paying.
• Existing debts: If you’re already paying a car loan, rent, and child support, they’ll see how much room you have left.
• Loan term: A longer term means lower payments - but more interest over time. Most lenders cap consolidation loans at 7 years.

One person in Melbourne had a 680 score but a 55% debt-to-income ratio. She was denied. Then she paid down $5,000 of her personal loan. Her ratio dropped to 32%. Approved the next week.

How to raise your score fast - if you’re close

• Pay down credit card balances: Keep them under 30% of your limit. If you have a $10,000 limit, aim to owe $3,000 or less. This alone can boost your score by 30-50 points in 60 days.
• Check your credit report: 1 in 5 Australians have errors. A $200 medical bill listed as unpaid? Fix it. You can get a free report from Equifax or Illion.
• Don’t open new accounts: Every hard inquiry drops your score by 5-10 points. Wait until after you’re approved.
• Make every payment on time: Even one late payment can undo months of progress.

One Sydney resident raised her score from 602 to 668 in 90 days by doing just those three things. She got her loan at 10.5% - $400 a month less than her old minimum payments.

Alternatives if you can’t get a consolidation loan

Balance transfer credit card: If you have good credit (700+), you can transfer balances to a 0% intro rate card. But watch out - the fee is usually 3%, and the rate jumps after 12-18 months.

Debt management plan: Through a non-profit, you pay one monthly amount. They negotiate lower interest with your creditors. No new loan. No credit check. Just a plan.

Family help: Some people borrow from family at 0% or low interest. It’s risky, but if done right - with a written agreement - it works.

Final reality check

You don’t need a perfect score. You need a clear plan. You need to stop digging. And you need to believe that you can change your money habits - not just your loan.

Start with your credit report. Know your number. Then decide: are you ready to fix your debt - or just move it around?