"I'm in my early 30s, have a current car loan, and have missed one credit card payment in the past. However, my credit score is lower than expected and I would like to know how to improve it."
- Question from Aisling in Lismore, NSW
Top answer provided by:
Brett Cruden
Hi Aisling,
What a great question.
I feel there needs to be greater awareness and accessibility of individual credit scores due to the ever-increasing rules around lending and the potential stresses that come with it! More specifically, when you apply to borrow funds, lenders will review your application and your individual credit score will play a key role in assessing your attractiveness as a borrower.
To answer this question, it would be appropriate to break it down to better understand what your score is and how you improve it.
What is my credit score?
You can obtain your credit score from various providers within Australia, most of which may charge a fee to do so. Your score is based on information such as personal and financial information including but not limited to:
-Paying bills on time.
-Making debt repayments as per your contractual obligation.
-How much money you’ve borrowed.
-The number of credit applications submitted.
From here, agencies use the above data to work out a score that may resemble a low, fair, good or excellent rating or in some cases the score may represent a number.
Review your credit score for any discrepancies
After receiving your credit report, research suggests that many Australians have errors on their file. Some of the most common errors or wrongly reported information may include:
-Overdue payments that are not overdue.
-You were not notified of an unpaid debt.
-Repayment defaults listed although there may be an open dispute.
-A credit account opened fraudulently.
These can cause inconsistencies on your credit reports, so it’s important to make sure that the information that is listed on each report is accurate and correct.
How to improve your credit score
When it comes to improving your credit score, the below may be the most effective starting point:
Paying unpaid debts
This includes buy now pay later, car loans, credit cards and personal loans. Even if you pay it off, your report will still include mention of the default, though it will be amended to state that it's since been paid.
Pay any bills on or before the due date
This can be a hard one, especially if you move houses and forget to update your address details with utility companies. A good tip is to aim to pay all future bills promptly, so think about setting up a direct debit if you haven't already.
Minimise the amount of credit applications you submit
This essentially sends a message to lenders that you're financially ‘reckless’ or desperate for credit, neither of which paint a particularly favourable picture.
Build up your savings
Having a buffer as a ‘just-in-case’ not only gives you reassurance if the unexpected happens, but can help with your credit score by giving you the flexibility to always pay your bills on time.
Lenders need to make sure you’re in good financial shape before they approve your request to borrow money, so focusing on the points above may assist in improving your credit score.
Aisling, the good news is that you can always improve your credit score.
All the best,
Brett Cruden
While the Adviser Ratings Website facilitates the question and answer functionality, all such communications are between users and authorised financial advisers, of which Adviser Ratings has no affiliation. Adviser Ratings is not the advice provider and does not provide financial product advice and only provides information that is general in nature.
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