Bessie Hassan | Money expert at finder.com.au
Whether
you have a great credit score, a bad one or you’re confused as to what the
numbers actually mean, improving your credit score will shape your financial
future for the better. A good credit score can help you get a discount on your
home loan or help you secure new finance.
Here
are six ways that you can improve your credit score with minimal effort.
1) Check
your credit report
Your
credit score is based on the historical borrowing and repayment behaviour
listed in your credit report. Checking your credit report on your own
won’t have any impact on your credit score. However, if a lender requests your
credit report, it may leave a negative mark. This is why you should be careful
of how many lenders you approach for a loan, as it will often prompt them to
check your report.
Checking
your history yourself allows you to see what activities have affected your
credit score, giving you a better understanding of what you should and
shouldn’t be doing. You might also be able to find any mistakes that have been
made by credit reporting bodies and take action to correct them.
2) Make
sure you have a borrowing and repayment history
Having
debt doesn’t sound like it would improve your credit score but a completely
blank credit report doesn’t assure lenders that you’re a responsible borrower.
If you don’t have any loans, it might be a good idea to start using a credit
card, even if you only use it to pay for petrol.
3) Pay
your bills on time
Once
you have debt, it’s important to pay it off on time. Missed or late payments on
credit contracts such as credit cards, personal loans and home loans can
negatively affect your credit score. Making the minimum payment on time will
show healthy borrowing behaviour.
To
make this easier on yourself, set calendar reminders on your phone or computer
so that you don’t miss a due date. If you’re sure that you’ll always have
enough in your account to pay your bills, try setting up a direct debit to
automatically pay the bills when they’re due. Also make sure to let any banks
or lenders know your new address if you’re moving. That way, you’ll prevent
yourself from missing your bills and having them listed as defaults.
4) Lower
your credit limit
A
recent survey from finder.com.au found that two-thirds of Aussies believe that
only your credit utilisation ratio (that is, how much of your credit that
you’ve actually used) affects your credit score. However, in Australia, only
your credit limit is recognised rather than how much you’ve borrowed out of it.
For
instance, if your credit card has a $6,000 credit limit and you’ve only
borrowed $1,400, the only figure affecting your credit score will be the
$6,000. Therefore, it’s a good idea to lower your credit limit to $2,000, or to
whatever credit limit is just enough for you.
5) Consolidate
your debt
If
you have several loans, consolidating them all into one account can make it
easier to manage your repayments. It will also reduce the risk of any negative
activity on your credit report and it can help you save on fees and get you a
lower interest rate.
6) Check
your credit score regularly
The
final way you can actively improve your credit score is to check it regularly.
Getting your credit score doesn’t require much effort or time. All you need
to access your credit score for free is your email,
name, sex, date of birth, driver’s licence and your address.
Once
you’ve made an account, checking your credit score is easy. Generally, your
credit score will change every month if there is any new activity on your
credit report.
—
Ultimately,
improving your credit score comes down to proving that you’re a responsible
borrower that can make punctual and regular payments. Ensuring that you borrow
within your means and never miss a due date can almost definitely lead to an
improved credit score.
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