Used to measure the ability to manage debt, a higher score makes individuals appear more responsible in the eyes of the lender and may receive discounted rates as a low-risk borrower. As a significant factor in determining borrowing capacity, building up and maintaining a healthy credit score is critical in securing finance for property. Fortunately, the criteria for a positive credit score is public knowledge. At the end of the day it could be generated with the proper habits and strategy in place.
Review your credit reports
Request a credit report from one of the three main credit reporting bodies in Australia, Equifax, Experian and Illion. It won’t negatively affect your credit score and lets you understand your position and use it as a benchmark for improvement. Critically, take this opportunity to check if all the personal information is accurate and all debts listed are yours.
Develop a credit history
Show lenders that you can manage your finances responsibly by having a healthy amount of debt. Having no liabilities at all leaves a big question mark beside your name as lenders can’t turn to historical data to verify your ability to make repayments. Make sure your name is in the utility bill even though you are sharing with other people.
Credit cards can help
You don’t need a credit card to establish credit history, but keeping one can be beneficial to demonstrate effective financial management, especially if you have no other ways to show credit history. However, it is good practice to not apply for too many of them or, come close to or surpass the credit limit.
Avoid going credit shopping too often
Checking your credit score and credit report usually have no impact on your score. Yet it is important to know that your score is affected when lenders conduct credit checks when you apply for a loan. It usually depends on the lender as some can calculate your borrowing capacity without a check, and others conduct a check as soon as you apply from online portals.
Pay your bills on time
The single most important tip here is to pay your bills on time. Failing to do so can adversely affect your credit score. Some ways to stay on track is to set up reminders or automatic bill repayments as well as incorporating a filing system for debt repayments. These include any loans, telco and utility bills.
Your credit score cannot be built up overnight, but can be instantly lowered with a few mishaps or defaults. It is no secret that the key to a good credit score is to stay disciplined and sustain strong financial habits.
Any advice provided is general in nature and should be considered in line with your financial situation, needs and objectives.
