A healthy credit score can see you enjoy access to a wider range of loans, and a chance to land a great rate. But what if your credit score is looking a little lean?
The good news is that it is possible to turn a bad credit score around. We explain 6 easy steps that can help transform your credit score from ‘meh’ to magnificent!
1. Think about your timing
Improving your credit score can take time. But time can also work in your favour.
Recent events can have a greater impact on your credit score than those that happened years ago. In fact, different types of information are only held on your record for a set period – like credit enquiries, which will be held on file for no more than five years. So if your credit record has a few dents in it, it could help to hold off applying for a loan until your credit score is back in good shape.
2. Be sure your credit file is accurate
People and computers can make mistakes. That makes it important to take a look at your credit file to be sure there are no incorrect entries, which could drag your credit score down. You can request a free copy of your credit file once a year from credit reference agencies like Equifax or Experian. If you do find an error, contact the credit reference agency or the relevant creditor to have it corrected.
3. Make your repayments on time
Since 1 July 2018 a new system called ‘comprehensive credit reporting’ has come into full effect. It allows good money behaviour to be noted on your credit file whereas in the past, only negative information like unpaid debts were recorded.
The new system makes it easy to improve your credit score by making your repayments on time. A simple way to stay on top of them is to set up reminders on your phone for payment dates, or talk to providers about paying by direct debit.
4. Cull those unused credit accounts
Having a large number of credit accounts can see lenders raise questions about possible debt problems. Help your credit score by shutting down credit accounts you no longer use or need. Or think about consolidating multiple personal loans or credit cards into a single account. Home loan refinancing can be an option here.
5. Stick to making one loan application
When it comes to home loan applications, less is more. Making multiple applications may seem like a good idea but they can wreak havoc on your credit score.
A smart strategy is to focus your efforts on finding the loan that is right for your needs and restricting yourself to making just one application. It’s an area where your Aussie Broker can help.
6. Set up alerts for changes to your credit score
Your credit score can change from time to time in line with changes in your financial situation. However, it can also change in line with factors not driven by you – like fraudsters trying to steal your identity to take out credit in your name.
That’s why it’s a good idea to regularly check your credit score. Or set up alerts through Credit Savvy. It’s a no-fuss way to stay up to speed with changes in your credit score. It’s not just a warning system for possible fraudulent activity, it can also alert you to incorrect entries from lenders at an early stage.
Have you checked your credit score recently? Head to Credit Savvy to see what sort of shape your score is in.
You may also be interested in Which age group has the highest credit score?, Questions about credit scores that you were too afraid to ask and I had a bad credit score. Now I don’t.