7 tips to improve your credit score
When applying for personal loans or home loans, your credit score can make or break whether you get approved or denied. Shockingly, nearly 89 per cent of Australians have never checked their credit report, according to Veda.
If you’re looking to get your bank accounts sorted, a healthy credit score and a well managed credit history is ideal evidence to lenders that you can indeed pay off debt.
But how can you improve your credit score if it’s not quite up to snuff at the moment?
- Fix up any discrepancies
Before you apply for any type of loan, make sure your credit history reflects reality. Any paid collections or wrong account information needs to be marked as resolved.
- Keep your first credit card indefinitely
An easy way for your credit score to go up is by establishing a history of prompt payment. So hold on to your first credit card to ensure better ratios or time and spending.
- Closing old accounts
While you should keep your first credit card to elongate credit history, having too many debts can not only increase the chance of identity theft, but also incur unnecessary fees.
To minimise financial risk, a general rule is not to have more than four credit accounts.
- Pay off as much current debt as possible
The balance of debt-to-income is a major factor in loan approvals. While it might seem difficult to strike the balance between saving for a deposit and paying off debt, it’s better to have lower debt burden in addition to saving for a down payment.
Because of this, paying off any loans you have can positively impact your loan conditions and chance for approval.
- Increase your credit limits
Now this point is to be taken with caution. Only if you’re on top of your expenses should you consider increasing your credit limits, as this can allow you to decrease credit utilisation.
As a rule of thumb, you should keep your monthly utilisation under 20 per cent of your available credit.
- Explain your spending in a letter
If you feel the negative information on your history is due to extreme or unusual circumstances, you can write a letter of goodwill to your creditor asking to remove the information from the report – leading to a boost in points. Note there is no obligation on the creditor to do this and they may ask you for evidence to support your request.
- Keep paying, on time
A fall-safe way to improve your credit score it to continually pay your loans and bills on time, no matter what your end-goal is.
For more information and advice about personal loans or credit scores, reach out to us.