If you’ve discovered your credit score is holding you back from accessing finance it can feel devastating—but the good news is, that there are steps you can take to improve it over time.
Understanding which actions are damaging your score is just as important as learning the behaviors that will have a positive impact. So to help you do the right things and avoid the bad, in this article we’re sharing 7 essential financial dos and don’ts for when you’re working on improving your credit score.
4 important things you can do
Pay your current loans and bills on time
This is a simple thing but oh so important. Pay attention to those due dates and be sure to pay on time as this demonstrates to lenders that you are reliable and can be trusted with a loan. Late and overdue payments will have the opposite effect, so set up reminders or recurring transfers to help you stay on top of it. Make sure loans and bills are in your name too, otherwise your score won’t get the boost you deserve for being reliable and punctual with your payments.
Lower the limit on existing credit cards
Reducing the limit on your credit cards can have an instant positive impact on your score, so where possible reduce it to a lower amount. Lenders will always look at your credit card debt as the maximum amount available on the card rather than the actual amount you owe, even if you never max it out. So be mindful of this, and keep the limit as low as possible so it is well within your means.
Hold onto credit cards you can manage
If credit card debt is not a problem for you, it’s a good idea to keep an active credit card account as it provides evidence that you can manage your spending and repay your debt. As mentioned above, it’s a good idea to keep the limit reasonable and low so that you avoid overcommitting and falling behind, and don’t appear too reliant on credit.
Make sure your details are correct
Ensuring that your personal details on your file are up to date is another simple but important way to provide lenders with confidence that you are dependable. If you’ve moved house, changed jobs or have a new phone number be sure to update the relevant credit reporting body. You may also contact them to request a copy of your file if you believe there is a mistake. Check the Office of the Australian Information Commissioner website for instructions and contact details on how to access your report. You may also wish to contact a specialist credit repairer such as CreditFix Solutions for help with cleaning up any unfair defaults, enquiries or repayment history information that is hurting your ability to access credit.
3 essential things to avoid
Applying for credit too often
These days, it’s fast and easy to jump online and apply for a credit card or bank loan. However, every credit application you make, whether you accept it or not, is listed on your file and multiple applications will reduce your score. When you are applying for credit frequently it looks from the outside like you are in financial trouble and this is why your score takes a dip. For this reason, if you are in need of credit and shopping around for the right loan, pick up the phone and talk to lenders to find the right fit. Then you can make an informed choice without negatively impacting your score.
Don’t use payday lenders
You may have noticed when you buy online there are now many ‘buy now, pay later’ offers available with a few simple clicks. While this may seem convenient and appealing, it is bad news for your credit score. As these payday lenders are offering you a form of credit, it is noted on your file, and having multiple lines of credit going at the same time makes it look like you are spending beyond your means. Stick to paying upfront, or using your own credit card rather than using payday lenders on your purchases.
Do not check your credit score too frequently
While you may be desperate to find out how your credit score is improving, you should avoid checking up on it too often. Each time you check, it is marked on your file—and as your credit score is primarily used by lenders to determine your suitability for accessing credit, if you are constantly checking up on it, you send a message that you are anxious about your financial stability which does not look good. Do the right things, avoid the wrong things, check in occasionally, and trust that the rest will take care of itself.
With the right actions, improving your score is achievable
If your credit score is not where you’d like it to be right now, there is much you can do to turn it around. By taking positive steps that demonstrate your reliability and avoiding the actions that send the opposite message, you’ll give your score and your future chances of accessing credit a much-needed boost.