by Kate Browne
If you’ve got a bit of a guilty conscience when it comes to your credit history, you’re not alone.
Around 2.7 million Australians avoid checking their credit report for fear of having a bad credit score. Yet this three-digit number is one of the first things lenders will look at when assessing your loan application.
Your credit score ranges from 0-1,000 or 0-1,200 depending on the bureau you use to access it. A good score falls between 622 and 725, and an excellent one falls between 833 and 1,200. Anything below 600 and you might find yourself rejected more often than not when applying for finance. Factors that can drag down your score include significant debt, defaulting on repayments or lodging multiple credit applications.
If this sounds all-too familiar, then your credit score might be a little lacking in the numbers department. The good news is that your score is never permanent. Anyone can improve their credit score or boost their existing one provided they make the necessary changes to their spending habits. While this won’t boost your score overnight, you’ll be well on your way to improving it in the long run.
Below, we’ll take a look at how you can improve your credit score over time.
Regularly monitor your credit report
Checking up on your credit report from time to time means you’ll be aware of any adjustments to your credit score. You can access your report for free and register for updates or alerts if anything changes. If you do notice that your score has dropped, go through all the recent listings on your credit report and make sure they’re correct – you don’t want to be negatively impacted by a system error.
If you notice a default, judgement or blackmark on your credit file, your capacity to obtain a loan in the future may be impacted. Credit repair services can investigate the issue and assist in the resolving these listings. If everything seems legitimate, you’ll now be able to identify where you’re going wrong financially. From here, you can start to rein in your spending habits.
Consolidate your debts
Too much debt can be highly stressful and won’t do your credit score any favours, which is why you should aim to pay it off as quickly as possible. A balance transfer can be a good way of consolidating multiple debts into a single account. From here, you can pay off the remaining funds at a lower interest rate and get ahead sooner.
Keep on top of your bills and repayments
We’re all guilty of a late payment here and there. And while coughing up for a bill a couple of days behind schedule isn’t going to impact your credit score, a default will. A late payment becomes a default if it exceeds $150 and is more than six weeks late. Not only will a default drag your score down, it can also hang around on your credit report for up to five years.
To prevent this from happening, set up auto repayments to save you from having to remember them in the future. It’s also worth making sure that all your contact details are up to date so bills or overdue notices don’t get sent to the wrong address. Always speak to your lender if you’re having difficulty meeting your repayments.
Limit your credit applications
While it’s important to shop around for a credit card that suits your needs, you shouldn’t be applying for multiple cards at once. Many people don’t realise that each time you apply for a credit card, it will appear on your credit report. This means that if you have several applications rejected in a short amount of time, it can potentially lower your score (and doesn’t look good from a lender’s perspective). Try and limit yourself to one or two applications at a time.
Lower your credit limit
If you already have a credit card but you’re not using all of the available credit limit, it’s a good idea to contact your bank and request to lower it. Having a consistently low credit balance looks good on your credit report and is looked at favourably by lenders.
While you won’t be able to make up for years of bad spending overnight, a poor credit score doesn’t have to last forever. Consolidating your debts, keeping on top of repayments and minimising credit applications will all help to boost your score over time. It’s never too late to clean up your financial act, so don’t put it off any longer!