There are good reasons to aspire for a high credit score. It can increase the odds of a lender approving you for a loan or line of credit. You may even acquire more favourable borrowing terms, such as a lower interest rate.
Why? Because, through the eyes of a lender, a high credit score equates to a history of positive financial activity. Paying your bills on time, for example. Therefore, a lender will perceive you as a low-risk borrower, unlikely to default on your loan repayments.
Unfortunately, if your finances are in rough shape, then so might your credit score. This can happen if you have a recent history of late or missed payments, too many credit applications, or a high credit balance. Making even small changes can help turn things around.
Key takeaways
- A credit score is a numerical figure that sits between zero and either 1,000 or 1,200.
- The lower your credit score, the riskier you are to lenders, and the less likely a lender is to approve you for a loan or other financial product.
- Credit reporting agencies, such as Equifax, are responsible for creating and sharing credit reports. Organizations then use these reports to calculate your credit score and assess your lending risk.
- Paying your bills on time is one of the fastest, most efficient ways to raise your credit score.
How to Improve and Maintain Your Credit Score
Here are six top tips to improve and maintain your credit score.
1. Stay on top of your existing debts and loans
Make a concentrated effort to pay off your existing debts and loans on time, every time. Apply this rule to all your accounts, including your utility bills, phone, internet, rent, mortgage, credit cards, and loans.
With the introduction of Comprehensive Credit Reporting (CCR) in Australia (2014), good financial habits appear as positive data on your credit report, and thus increase your credit score. Of course, the opposite is true as well. Negative financial activity, such as too many late or missed payments, will eventually lower your credit score.
2. Update credit report data
Review your credit report. Then, contact the credit reporting body (who gave you the report) to correct any out of date or inaccurate data.
You can request a free credit report once every three months from any of these three credit reporting bodies: Equifax, Experian, and illion. You may want to request a credit report from all three credit reporting bodies, as they each may carry different information about you. You can also request a free credit report if: a lender has denied you credit within the past 90 days, or you have recently updated any credit-related personal details.
Outside of the free request window, a credit reporting body may charge you a small fee. Avoid companies that claim they can remove negative credit report data that is correct. This is legally impossible.
3. Avoid applying for too much credit
Each time you apply for credit, the activity appears on your credit report – even rejected applications. If you have multiple credit applications (close together) to your name, a lender may see this as financial stress. As a result, they may reject your loan application, or approve you but on less favourable terms (e.g. high interest rate). Therefore, before you apply for credit, explore other ways to improve your financial situation and credit score.
4. Consider debt consolidation
Struggling to pay off more than one debt? Consider debt consolidation. Instead of paying off multiple debts (each with separate due dates) per month, combine them into one weekly or monthly instalment. This makes it easier for you to track, as you have only one due date to remember. Just ensure there is enough money in your account before each due date.
When you speak to a Debt Management Specialist, they will review your situation. They will also negotiate with your creditors who, depending on their willingness, may agree to a new debt repayment plan; they may even reduce the amount of interest and fees you owe, too. From there, pay your debts to the debt consolidation company, who will disperse the funds to your creditors. This arrangement continues until you wipe your debts clean.
5. Lower credit card utilisation
If you have a credit card, try to lower your credit card utilisation rate. This is a percentile figure that represents how much available credit you use each month. Let us say the monthly spending cap on your credit card is $300. If you were to spend $90, then your credit card utilization rate would be 30 percent for that month.
Keeping your credit card utilisation rate low (and paying off your card each month) is great news for lenders. They will see that you can comfortably spend, and pay back, your credit card without overly relying on it. This will help raise your credit score and increase the odds of a lender approving your loan.
6. Update your personal details
Have you recently changed address? Switched to a new email or phone number? Update your personal details for all your accounts to reflect these changes. Otherwise, you may miss important correspondence, such as paper bills sent to your address or messages sent to your email.
If you fail to respond to your creditor in time, they may report you to a credit reporting body. The credit reporting body will then mark the late or missing payment on your credit report. This mark will stay on your credit report for a period – even after you make the payment. For this reason, be sure keep your creditors up to date on all relevant personal changes.
Speak to Debt Fix Today
Raising your credit score is a challenging but worthwhile goal. Even if you feel the odds are against you, switching to good financial habits can help turn your situation around. Of course, that does not mean you must make the journey alone.
If you are struggling to stay on top of one or more large debts, speak to Debt Fix today. Your Debt Management Specialist will assess your situation and help you take back control of your finances with a weekly or monthly debt repayment plan. This way, you will pay what you can afford – not what your creditor demands of you.
Get started with a free 30-second consultation. Making an application is quick, easy, confidential, and it will not affect your credit score.