Want a good place to start? Check out your credit file to see where you stand
Trust us: you want to increase your credit score. But if you are feeling like your credit history is a mess and are feeling overwhelmed, there are ways that you can get back into lenders’ good books. Here are 6 ways to increase your credit score.
Check out your credit file to see where you stand
If you want to increase your credit score, the first thing you should do is check out your credit file to see where you stand. Of the many credit reporting bodies you can contact to get your credit file in Australia, the major ones are CheckYourCredit, Equifax, illion, and Experian. In Australia, you can generally ask for a free copy of your report every 12 months. In other circumstances—such as if you have been refused credit in the past 90 days—you can request a free copy of your credit report more frequently. If, on the other hand, you do not mind paying a small fee, you can request your credit report at any time. This is an important step to increasing your credit score because it will tell you which areas you might need to address.
Make sure there aren’t any errors
After you have gotten a copy of your credit report, you will want to review it with a fine-toothed comb to make sure there are no major errors or listings that you will want to contest. Occasionally, lenders or banks will record information or issues that may have been resolved already or that are simply inaccurate. If you should fall victim to this, you will then have to contact the bank or lender to request that they remove the listing. In the event that there is a mistake, the bank or lender will then reach out to the credit reporting body to have the mistake wiped from your credit report.
Another error that may occur on your credit report could result from identity fraud. In fact, the potential for identity fraud is a good reason to check your credit report even if you have no issues with your credit score. This practice will also help prevent any surprises, such as a fraudster taking out several credit cards under your name.
Pay your bills on time
It is always a good idea to pay your bills on time, regardless of the reason, and a good way to ensure this practice consistently is to set up direct debit. Because reporting practices are changing, lenders are able to access your complete credit history—and not only the negatives such as defaults or various infringements.
For instance, every credit product application, whether or not you have made repayments on time, and the repayment amounts, all show up on your credit report. In other words, if you are responsible with your funds, it is just another way to impress lenders. They will be aware that you are getting your finances on the right track, even if you have made missteps previously.
Have a credit card
Having a credit card is much better than having no debt at all. To ensure you are even more creditworthy, it is a good idea to make measured credit card use, i.e., to make your payments regularly and on time. Doing so is evidence that you are more than capable of managing debt. You can even cut back on your credit limit if you find yourself struggling to manage your credit card. Another tip in utilizing your credit card properly is to only buy things that you know you can repay immediately.
Pay off any outstanding debts
Pay off any outstanding debts for the simple reason that unpaid debt is the best way to damage your credit score. In other words, your top priority should become paying any unpaid bills or debts as fast as possible. For instance, if you have a bill that is $100 and a couple of months pass since the debt collector has contacted you, it will remain on your credit report for five years as a credit default. Even paying it off won’t strike it completely from your report; however, it will be noted that it has been paid. The bottom line here is that it is better to pay off any outstanding debts at some point versus not at all.
Minimise new credit applications
Do not apply for multiple credit products—or at least not too many. When you do, you accumulate hard equity, which is when a lender will request to see your credit history even before lending you any money. Plus, every request gets recorded on your report. You should know, however, that your credit score will be put at risk only if too many credit applications happen over a short period of time—don’t panic about one or two hard enquiries.