How to improve your credit score
How do you score credit-wise?
Credit score, credit rating. Whatever you call it, your score is a vital part of your life. When cash flow is in the spotlight, it's important to remember that how you spend cash and use your credit card will determine just how smoothly your life will run.
Banks, credit unions, mortgage brokers, credit card providers and other lenders, even employers, will use your credit score to gain insight into your spending habits and how financially responsible you are.
What's in my credit report?
Your credit report will paint a picture of your current financial situation. It is updated whenever you apply for new credit; be it a credit card application, or loan (personal, car, home or business). Keep in mind that credit scoring is not limited to banks and financial institutions. Mobile phone companies, landlords, government departments and insurance companies can also contribute to your report. If you've ever paid a bill late, delayed paying a parking fine, or are behind in loan repayments, this information may show up in your credit report and affect your credit score which will affect your ability to borrow money in the future.
Why is my credit score important?
Your credit score is a numerical representation of your creditworthiness. In Australia, it is widely accepted as the primary method of proving a person's reliability for obtaining and managing credit. Lenders will use this credit score to evaluate the risk posed to lending you money. If you're a liability, they may not lend you money in order to mitigate their losses due to bad debt. So if you're looking to qualify for a loan, secure a lower interest rate and get the credit limit you want. it pays to
have a reliable credit score.
How can I access my credit score?
Contact an accredited credit agency to conduct a credit check on your behalf. There are also online companies who can help, such as Check My File who provide access to your credit report online. Be wary of who you supply your personal information to, as some fraudulent companies offer to improve ratings for free, but end up stealing your personal information for identity theft.
Can I improve my credit score?
If you have a big dent in your credit score and it's not so glowing, the first step to repairing it is to start paying your bills on time. This demonstrates that you are taking responsibility and don't have to be hassled for repayments.
Next, reduce your debt to credit ratio. It looks better to carry out a balance transfer to a credit card that has a higher limit. For example, $3,000 owing on a $5,000 credit card looks worse than $3,000 owing on an $8,000 credit card, plus if you transfer your debt at a low rate you can buy yourself some time to pay it off.
It also pays to keep old and current accounts open for as long as possible to illustrate that you're capable of having a lengthy credit history.
Ultimately, the best way to keep a reliable and healthy credit report and score is to exercise excellent money-organising skills. Budget, pay all of your bills on time and use your credit card responsibly. Use a PO Box if you move around a lot so none of your bills get sent to old addresses. Regularly examine your report so you're aware of any discrepancies or fraudulent use.
Related story from Today Tonight: Credit ratings check
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