A good credit score demonstrates your financial health when it comes to lending. Without it, it’s very difficult to get any form of loan, particularly a home mortgage. If you manage to obtain a loan, a bad credit score will result in paying an interest rate beyond the market average.
Having a good score will provide better flexibility to source the right loan, while allowing you to access more money to buy that dream home you’ve been waiting for.
Here are some useful tips:
Keep your payment history in check
Payment history is an important criteria in obtaining a good score. It only takes one late payment to reduce it. One of the best ways to minimise missing a payment is to set an automatic direct payment system. You can also set up some reminders on a computer or device, in your diary or even on your fridge. To maintain a good score it’s essential not to fall late on any bills.
They track and maintain their expenses
The majority of people do not track their expenses or maintain their budgets. However, keeping a record of how you spend your money every month is a good start to improve your score. If you keep records you are not likely to skip payments and this will boost your credit score.
They try to reduce available credit
The second most important aspect is minimising the amount of credit you use. People with a high credit score borrow less, while those with a low credit score tend to maximise their borrowing. You can definitely see an increase in your credit score when you pay off debt.
They apply for credit only when necessary
Think twice before applying for credit . You may be considering signing up for a new store credit card to take advantage of their discount. The problem is that if you take out several credit accounts in a short period, your score will definitely fall. The reasons are that credit agencies are cautious of consumers who have multiple credits under their name.
They regularly check their credit report
To improve your credit score, you need to know your current score. The score will be between 300 and 850 and the higher it is the more likely you are to get a loan. You should also review your credit report which will help you find any errors.
You can learn on this topic through MoneySmart.gov.au.
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