5 Ways to Improve Your Credit Score
This article is sourced from Get Your Credit Score, If you would like further information on your credit score, follow the link to getcreditscore.com.au
Step 1: Pay your bills on time
Late or defaulted repayments are a credit score killer! Thankfully, it’s an easy one to fix.
Now that comprehensive credit reporting is here, paying your bills on time, every time, will go a long way to improving your score. Think of comprehensive credit reporting as a grading system. Each time you miss a repayment, like on your credit card or phone bill, your credit score will go down. Pay it on time and your score will improve.
Remember, an overdue payment will remain on your credit report for 5 years! So if you struggle to keep up-to-date on all your expenses try setting calendar reminders of when your payments are due. Or consider setting up direct debits.
Step 2: Only apply for credit when you need it
How many credit enquiries have you made in the last 6 months? If you can’t remember then take note.
“Next time your bank sends you a credit card in the mail, ask yourself: Do I really need this?”
A common mistake people make when looking for credit is to apply for loans as part of their research. It’s an easy mistake to make as many people see it as a process of elimination: “I applied for three loans but I really hope this ONE is approved.”
Each time you apply for credit (credit card; personal loan; car loan); you’re effectively shaving points from your credit score as these enquiries are saved to your credit report. Too many enquiries in a short period of time and you’ll be facing an uphill battle to improve your score.
Making multiple hard enquiries in a short period of time is a surefire way to send your credit score south. Not only is it bad for your credit score, it’s not a good look for lenders.
What’s the easiest fix for this situation? Only apply for credit when you need it. Next time your bank sends you a credit card in the mail, ask yourself: “Do I really need this?”.
Step 3: Do your research before you apply
There are a number of websites you can use to do your research before you apply Take the time to consider what you need and what credit product will best service that need. Then research online to find the best product for you, before you apply.
Be sure to read the fine print to confirm the product is a right fit for you and your circumstances. For example, many ‘platinum’ cards will require you to be earning at least $65k. These cards may offer the best perks, but generally have the highest annual fees as well, so be sure to do your homework first.
Step 4: Take ownership of your credit profile
Having an active credit account is a crucial step to improving your credit score. An active credit account simply means you have credit commitments.
We’re not suggesting you race out and take on a bunch of credit cards or personal loans – please don’t do that – rather start small and take ownership of your credit profile.
“If you are the paying the bill, it’s important to have your name on the account.”
Say, you live with your partner and split all utility bills straight down the line. But all the accounts are under your partner’s name. Then you’re building your partner’s credit profile and leaving your own outside in the cold.
The same applies for phone plans, internet bundles, credit cards and mortgages. If you are the person paying the bill, it’s important to have your name on the account.
Step 5: Regularly review your credit report
Unfortunately, some credit score killers are out of your control such as identity fraud.
However, regularly reviewing your credit report can be effective prevention method. Equifax, Australia’s leading credit reporting agency, offers consumers a free credit report annually.
Get your free Equifax credit report and review it carefully. If you spot any unusual applications on your report or simply can’t remember apply for it, it’s best to contact Equifax just in case.
If your credit application is declined and your not sure why, you can obtain a free credit report from Equifax within 90 days of making the application. It’s always a good idea to double-check these things, even just for peace of mind.
Read more about improving your credit score HERE
Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstance before acting on it, and where appropriate, seek professional advice from a finance professional such as an adviser.