HomeCredit

Tips To Improve Your Credit Score

Tips To Improve Your Credit Score
Like Tweet Pin it Share Share Email

In a recent post, I looked at how to check your credit score for free. So now that you know your credit score here are some tips to improve your credit score? If you already have a good score how can you ensure you maintain it? Maintaining a good credit score will allow you to apply for credit cards and loans with confidence and assist in getting the best possible interest rates.

 

Check Your Credit Score To Ensure The Information Is Accurate

Perform a free credit score check and ensure all information is accurate. If you find any irregularities get in contact with the upstream provider (Equifax, Experian) to get it sorted. Some credit score providers offer an alerting system to email or contact you if there any significant changes to your credit.

Pay Your Bills On Time

One of the most important factors in determining your credit score is ensuring you pay your bills on time. A missed payment for 60 days stays on your record for five years.  It is good to get into the practice of paying your bills as soon as you get them instead of putting them in a pile to pay them when they get closer to the due date. Automation can help remove the risk of forgetting to make a payment. Most providers also offer the option of directly debiting the bill and may even offer a discount if you do so.

If you are ever in a situation where you can not make a payment on time. Contact your provider before the bill is due and work with them to get an extension or make a part payment. Having an emergency fund to cover unexpected expenses can get you out of trouble.

Make All Your Credit And Loan Repayments On Time

As well as paying your bills on time it is equally important to make credit card and other loan repayments on time.  When you apply for credit make sure the repayment options are suitable to help avoid missing payments. If you take a loan out over a longer period of time the minimum payments will be less, remember you can always pay more!

Build A Credit History

The whole idea of a credit score is to prove to lenders that you are responsible when it comes to paying back your debts. Start small by having utilities, mobile phone plans, internet and such in your name with accurate address and contact information. Build up a good reputation.

Keep A Good Debt-To-Credit Ratio

A $250 balance on a credit card with a $1000 limit is a 25% debt to credit ratio. The lower the ratio the better it is for your credit rating. Keeping a low balance on your cards or increasing the limit to lower the ratio will help to improve your credit score. It may not be a good idea if you are likely to increase your balance because it is available.

Updating Your Address Details When You Move House

It is easy to forget to change your address when you move. I find the best solution is to have your mail redirected to the new address for at least 6 months to give you time to make the necessary changes.

Credit Card Expiry

This one catches most of us out at one point and has caught me out a few times. When you get a replacement debit or credit card don’t forget to update your providers with the new details. It may be helpful to keep a list of automatic payments associated with a particular card to help keep track.

Avoid Making A Large Number Of Credit Inquiries

Making a large number of credit inquiries can adversely affect your score. This includes making applications for credit cards/balance transfers and loans. Checking your credit score is not considered an inquiry whereas applying for a credit card is.

Compare Your Credit Score (Equifax)

  • Below Average (Bottom 20%) – Based on history, scores in this category indicate that an adverse event such as a default, court judgement, personal insolvency or similar. Is more likely to be recorded on a credit file in the next 12 months when compared to the average credit active Australian population as recorded on Equifax’s credit bureau.
  • Average (21% – 40%) – Based on history, scores in this category indicate that an adverse event such as a default, court judgement, personal insolvency or similar, is likely to be recorded on a credit file in the next 12 months when compared to the average credit active Australian population as recorded on Equifax’s credit bureau.
  • Good (41% – 60%) – Based on history, scores in this category indicate that an adverse event such as a default, court judgement, personal insolvency or similar, is less likely to be recorded on a credit file in the next 12 months when compared to the average credit active Australian population as recorded on Equifax’s credit bureau. In other words, the odds of no adverse events occurring on your credit file in the next 12 months are better than the average population odds. Hence this score has been classed as the good population grade.
  • Very Good (61% – 80%) – Based on history, scores in this category indicate that an adverse event such as a default, court judgement, personal insolvency or similar, is unlikely to be recorded on a credit file in the next 12 months when compared to the average credit active Australian population as recorded on Equifax’s credit bureau. In other words, the odds of no adverse events occurring on your credit file in the next 12 months are more than 2 times better than the average population odds. Hence this score has been classed as the very good population grade.
  • Excellent (81% – 100%) – Based on history, scores in this category indicate that an adverse event such as a default, court judgement, personal insolvency or similar, is highly unlikely to be recorded on a credit file in the next 12 months when compared to the average credit active Australian population as recorded on Equifax’s credit bureau. In other words, the odds of no adverse events occurring on your credit file in the next 12 months are more than 5 times better than the average population odds. Hence this score has been classed as the excellent population grade.

 

Do you know of any other tips to improve your credit score? I would love to hear your experiences with your credit score.

Comments (3)

Leave a Reply

Your email address will not be published. Required fields are marked *