5 tips that could improve your credit score
So you’ve checked your credit score, now what? If you think your credit score could use a bit of an improvement, check out these five tips below that may help you raise your score.
1. Check your credit information
We all make mistakes, even your credit providers do. They might have your wrong address, report a credit enquiry that you didn’t make, or they could have reported a credit enquiry twice. That’s why it’s important to check your credit report or credit file information (with each credit reporting body in Australia) for errors once a year. You are entitled by law to one free credit report per year from each credit reporting body.
A credit provider can look at your credit file to assess your credit worthiness so you want them to have an accurate and up to date picture of your credit history. If you spot any errors, contact your credit provider to have the mistake fixed.
2. Pay down your debts
Having a history of late payments and defaults can be a red flag to potential credit providers and can negatively impact your credit score. Whilst you can’t remove late payments and defaults from your credit file unless they are incorrect, you can minimise their impact on your score by repaying the amounts owing.
If you’re having problems managing your debts or you’re in financial trouble, speak to your credit provider as soon as possible as they may be able to offer assistance before recording any negative information on your credit file.
3. Do your homework before applying for any new credit
When you apply for credit, a hard enquiry may be recorded on your credit file. Making lots of credit applications over a short period of time can lower your credit score. A credit provider may think all your past applications have been rejected by other lenders and assume you are a high risk to lend to. On the other hand, they might think your past applications have all been approved and you aren’t in a good position to take on more credit. Remember to do your homework first and only apply for credit if and when you really need it.
4. Always pay your bills on time
Paying your bills in full and on time isn’t just good for your finances, it’s good for your credit score too. While an occasional late payment here or there shouldn’t significantly lower your credit score, a history of missed payments can be a sign of financial stress and can damage your credit reputation. Bills that are more than 14 days overdue can now be reported on your credit file (if that credit provider has an Australian Credit Licence) so make sure you make your repayments on time.
Arrange to have your credit providers email you your bills rather than send them in the mail. Many providers can also send you a text message reminder when your bill is due. You can make use of your bank’s online banking system to have bills automatically paid from your account or to pay your bills whenever you’re out and about.
5. Be patient
Improving your credit score is a marathon not a sprint. Demonstrating a history of good credit management and waiting for negative information to age off your credit file takes time. While it may be frustrating to sit back and wait for your credit score to improve, sometimes that is all you can do.