You’re not the first person to ask this question. Maybe you’re looking to buy a house soon, or take out a commercial loan to start a business. Then again, perhaps you simply want to know where you stand and learn how you can improve your credit score.
Whatever your reasons, here’s a detailed guide to get you started.
First thing’s first – does your credit score matter in Australia?
Yes… very much so. Your credit score is the financial equivalent of a superhero cape – it gives you the confidence and power to take on the world of loans and credit. Think of it as your financial reputation. Just as your reputation matters in your personal and professional life, your credit score matters in the financial world.
Erratic credit behaviour can make you seem unreliable, while a good credit score can paint you as a dependable borrower, capable of managing your financial commitments with ease.
A high credit score can grant you access to the financial treasures you desire, like the dream car you’ve been eyeing or that exotic vacation you’ve been dreaming of. It can also help you save money on interest charges, allowing you to stay one step ahead financially. On the other hand, a low credit score can leave you stranded in a financial desert, cutting off your access to loans and credit cards or charging you exorbitant interest rates.
Remember, your credit score isn’t just a number – it’s a reflection of your financial health and stability. So, whether you’re starting out in the financial world or well on your way, taking care of your credit is a smart move that will pay dividends over the long haul. Keep your credit score strong and you’ll be an unstoppable force in the financial world – but how do you maintain a healthy credit score (or improve an unhealthy one)?
How to improve your credit score
A lot of the time when people ask this question, what they’re really asking is “how long does it take to improve your credit score in Australia”, or “how long does bad credit last in Australia”. There’s no black-and-white answer to this question – however, by taking the following tips on-board, you can certainly improve your credit score in a matter of months.
Consider reviewing your credit file to determine your current status
Obtain a duplicate of your credit file and evaluate if there are any aspects that require your attention. The three primary credit reporting agencies in Australia are:
You have the legal right to obtain one complimentary credit report every 12 months (or within 90 days of receiving a credit denial). You can request a report anytime for a minimal charge.
Be certain that your credit report is accurate and precise
A lot of Australians have discrepancies in their credit file. This could be due to identity theft, or an error made by the lender. If you spot an error on your report, you should get in touch with:
your credit provider
the credit reporting agency
the Privacy Commissioner’s office (if necessary)
Get a credit card
Strangely enough, having zero debts whatsoever does not guarantee your creditworthiness. While this might seem counterintuitive, the utilisation of a credit card (measured by timely payments) is an indication of your capability to handle debts. If you’re not proficient in dealing with credit cards, reduce your credit limit. It’s also advisable to utilise your credit card only for purchases that you’re confident you can pay back.
Avoid applying for too many credit cards (and pay for your existing ones on time!)
To maintain a good credit score, it’s strongly recommended that you don’t apply for more credit cards than necessary. Every credit application you make is recorded, and it can reduce your score, as multiple requests can indicate financial hardship.
However, since it’s easy to apply online, many individuals end up with a large number of applications on their file. So, do your research and consult with lenders to help you make an informed decision before making a formal application.
In addition, be sure to set up a reminder to make payments for your credit card bills promptly. You can also choose to set up a direct debit to settle your minimum payment. Your credit card and loan details are recorded on your report for a period of two years.
Display consistent and responsible payment behaviour
Your credit report does not cover details regarding utility payments such as electricity, water or gas bills, and home, mobile and internet bills. Nonetheless, ensuring the timely payment of these bills is essential for maintaining good credit standing. Failure to pay these bills may lead to your creditor passing on your debt to a debt collector and/or informing a credit reporting agency to record your delinquencies on your credit report.
If possible, try maintaining a diverse credit portfolio
What do we mean by this? If you can efficiently handle multiple types of debts such as a mortgage, a credit card, and a car loan simultaneously, this can drastically improve your creditworthiness.
Avoid disposing of a credit card that you seldom use or have already paid off fully
Don’t close accounts, even after clearing your credit card debts. Maintaining an open account will reflect positively on your credit score (provided there are no adverse reports associated with it, of course).
Demonstrate stability in your lifestyle
Showing a track record of stability is vital for lenders – they seek assurance that you have the ability to commit to something for a reasonable period of time. This is why it’s best to avoid frequent job and address changes, as it may suggest a lack of stability. A certain level of consistency in residence and employment can immensely enhance your chances of securing loans.
Please note: The information featured here is general in nature, and should not be considered as professional advice. It’s always recommended that you seek expert advice regarding your specific circumstances.
Speak to Perry Finance about your credit score and finance needs today
At Perry Finance, we’re committed to providing tailored finance solutions to developers and investors alike. From commercial loans and residential mortgages to development finance and everything in-between, our brokers will work closely alongside you to ensure you achieve your finance goals. Speak to one of our friendly professionals today.