With rate rises and the cost of almost everything going up, we’re all looking for ways to take some pressure off our finances. But there’s an important number you might not know – how to improve your credit score.
Research from Finder shows 73% of Australians are in the dark about their credit score. That’s equivalent to 14.6 million people – and almost half (48%) have never even checked.
Credit scores bring the details from your credit report into a single number, usually between 0 and 1,000.
A higher number means a better credit score – which gives you a better chance of approval for loans, credit cards and other products.
So how do you improve your credit score? Here are 5 simple ways to get started.
Recommended reading: Wondering what the average debt in Australia is? Check out Soho’s latest to find out!
1. Check your credit report and credit score regularly
Your current credit score is a baseline that you can build on, so it’s important to know what it is first.
You can get a free copy of your credit report and score through the Finder app in about 3 minutes, and it’s updated monthly.
The 3 credit reporting bureaus in Australia – Equifax, Experian and illion – also let you request a free report every 3 months.
While your credit score is a snapshot of your current financial situation, your credit report gives more details on how that number has been determined.
Some red flags are missed payments, default listings or a lot of applications for credit in a short amount of time. If any of these show up, you can still improve your credit score but it will take time.
Did you know your debt-to-credit ratio can help reduce your home loan repayments? Check out Soho’s article to see how.
2. Pay bills on time
Payment details for your loans, credit cards and some utility accounts are added to your credit report.
So when you pay on time, it adds to your positive credit history and helps raise your credit score.
Setting calendar reminders or scheduling payments ahead of the due date can help you pay on time. Some accounts also offer automatic direct debits – you just need to make sure you have enough money in your bank account for the payment to come out.
If you’re worried about making a payment on time, contact the bank or lender as soon as possible. They can help you work out a payment plan or other solutions, which also helps keep your credit score intact.
3. Lower your credit limits
If you never reach your credit card’s limit, lowering it is a positive action you can easily take to reduce your risk of debt.
It also increases your borrowing power for home loans and other products.
You can lower your credit card’s limit online or through your banking app. Or, call your lender and ask it to lower it.
4. Close accounts you don’t use
This can be a really simple way to give your credit score a boost.
Take a look at the accounts listed as “active” or “open” on your credit report. Are there any you don’t need or use any more?
If the answer is “yes”, close them.
You just need to make sure the account balance is at $0 then call the lender and ask to have the account closed.
If you still owe money on the account, either pay it off first or look at debt consolidation.
For example, you could transfer expensive credit card debts to a new card with a 0% balance transfer offer.
Having fewer accounts can save you money on fees, help manage repayments and improve your credit score.
5. Get rid of errors
Sometimes, details that shouldn’t be on your credit report end up there.
So if you see an account you haven’t opened or payment details that are wrong, contact the credit provider so it can fix it.
You can also contact the credit reporting bureaus and ask for incorrect listings to be removed.
As well as helping your credit score, this step can protect you from identity fraud.
And that’s yet another reason why checking your credit report and score regularly is a very valuable, simple step you can take for your finances.
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