8 Ways to Improve Your Credit Score in Australia

By Kaleem Ulah

November 2, 2023

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If you have a low credit score, you may have difficulty getting approved for major loans such as mortgages or credit cards. Today, many people in Australia are having trouble improving their credit scores. Thirteen percent of the sixteen million people in Australia with credit cards are at risk of defaulting on their payments. However, just because you have a low credit score does not mean that you cannot get your financial life back on track. Having a lower credit score will indeed make it more difficult to buy a home or get a loan, but the good news is that there are numerous things you can do to raise your credit score.

The truth is that having poor credit is not necessarily a death sentence. It's a hole that, with little self-discipline and much hard effort, you can easily dig yourself out of. It is essential to keep in mind that you are not going through this ordeal by yourself. If you have trouble fixing your credit, there are a few things that you can do to improve your credit rating. This will offer you the best chance of getting accepted and of receiving the lowest possible interest rate that is available.

What is a credit score?

A credit score is a numerical representation of your reputation as a borrower; in Australia, this concept is commonly called a credit rating. This score, which is computed based on the information that is included in your credit report, assists lenders in determining whether or not they are willing to lend money to you, and if they are, your credit limit as a borrower, the interest rates they will give, and any other stipulations that may be applicable.

If you decide to find out what your credit score is, you will be given a figure that can range anywhere from 0 to 1,000 or 0 to 1,200, depending on the credit bureau that was used to generate the score. A good rule of thumb to follow is that the higher the score, the better your credit rating will be, and the more credit-worthy financial organisations will consider you to be.

The steps to taking a look at your credit score

In Australia, the three most prominent credit reporting organisations are Equifax, Experian, and illion. Simply going to their websites will allow you to submit a request for access to your credit report. According to the law, they must provide free access to your credit report once every three months. Additionally, if you have been denied credit within the past three months, you can receive a complimentary copy of your credit report upon request. You can request a copy of your credit report at any time; however, you may be required to pay a fee.

Because the information that each company has on you can be different, it's possible to receive a complete picture of your creditworthiness, you'll need to request your credit report from all of the companies.

What information can you find in your credit report?

Your credit report includes your name, date of birth, residence, and employer, details about any loans or debts you have had in the past or now have and your repayment history concerning them.

If, at any point in the past, you have been unable to fulfil your repayment commitments, have defaulted on loans, or have been declared bankrupt, this information will also be included in your credit report. Furthermore, if you own and operate your business, any loans or debts associated with the firm may also be included.

In addition, your credit report includes a credit score, which can be thought of as a condensed version of the information contained in your credit report. This demonstrates your creditworthiness, which may be defined as the amount of debt you are now carrying and the likelihood that you will be able to repay any credit that is provided to you in comparison to other borrowers.

Can you fix your credit score?

Your credit score does not remain the same over time; rather, it reflects your credit condition just at the point when it is checked. Your score can go down if you make even one mistake. To boost your credit score, it is essential to stay current on all of your financial obligations. This includes the timely payment of your bills and the payback of any loans you may have taken out.

Contact the credit provider if you find something in your credit score report that looks suspicious, and ask them to examine it or modify it if necessary. If you provide information that is too old, you risk having your application for a loan or line of credit denied. In addition, if you have reason to believe that your identity has been stolen, you should report your suspicions to the authorities and contact the fraud departments of any credit companies you use.

8 Ways to improve your credit score

Now that you have an understanding of the factors that go into determining your credit score, it is time to talk about practical ways in which you may improve your credit score fast. If you have a good credit score, you will have more options available to you financially. Let's check out the top eight ways to improve your credit score in Australia.

1. Get a copy of your credit report

Getting a copy of your credit report should be the first thing on your to-do list. Equifax, Experian, and CheckYourCredit are the most important credit reporting authorities in Australia. However, you can contact any other credit reporting bodies in Australia if you like. You can get a complimentary copy of your credit report once every 12 months as a general rule or more frequently in specific instances, such as if you have been denied credit in the preceding ninety days.

2. Perform an error check

The second step is to check your credit score on your credit report. Checking that all of your personal facts, such as your name and date of birth, are correct is a good idea if you want to be sure that the credit report accurately refers to you and your past financial dealings. Also, carefully check the amounts recorded for each obligation and ensure that the credit reporting agency has accurate information about your finances. This will prevent any accidental duplication of debts and ensure the correct totals are reported.

After that, you should get in touch with your bank or credit provider and make sure they inform you accurately of all overdue debt. Check that any stated debt is classified as "in dispute" rather than "outstanding," and ensure that all of the debt is genuinely yours, as well as that you have not been a victim of identity theft or fraud.

3. Pay your rent and expenses on time

It is essential to maintain on-time payment of recurring expenses such as rent, phone, and utility bills. It's up to you whether this happens before or after they're due. Anyone can find themselves falling behind on payments at some point, but making it a pattern can have a negative effect on your credit score.

If you are unable to make your payments on time, you run the risk of having your account referred to a debt collector or of having a default noted on your credit report. Most service providers will enable you to set up a direct debit to pay your bill or a predetermined amount on time if you are concerned about forgetting or missing a payment deadline.

4. Wait before applying for any new credit

The fact that you have applied for a new credit or loan product will be reflected on your credit report, which may affect your credit score, regardless of whether or not the application is granted. If you make multiple credit applications in a short period of time, this can signal to lenders that you are in credit stress, which may have a negative influence on your credit score.

Obtaining new credit, like a balance transfer card or debt consolidation loan, can help you manage and improve your credit. However, to accomplish this, you must reduce the debt you owe rather than merely reorganise it. Caution is warranted while utilising this tactic because each credit application is logged on your credit report, and lenders may still regard it as a warning sign if they observe a pattern of applying for loans over a short period of time.

5. Increase or decrease your credit card limit

The amount of available credit is a crucial factor in determining the reliability of a credit report. If you're having difficulties keeping up with your credit card debt and you're concerned that you might be tempted to use the credit card while you're paying it off, consider lowering the limit on the card. Alternatively, if you are current with your payments but notice that you are getting closer and closer to your credit limit each month, you may inquire about increasing your credit limit. Your overall credit utilisation will immediately decrease whenever your credit limit is increased while maintaining the same outstanding balance. This can help your credit score tremendously.

6. Deal with defaults and debt collectors

Avoid having defaults and debt collection organisations add red marks against your reputation by taking preventative measures. Do not let your fear prevent you from picking up the phone and talking to your lenders. Try negotiating better prices, keep them informed of your condition, and don't put off having needed conversations.

You'll be in a better mood knowing you're moving in the right direction. Your financial hardship agreements with your providers can no longer be considered in calculating your credit score. The fact that you are making an effort to pay off your debt by organising financial hardship arrangements calls attention, and as a result, you should not be penalised. It is in your best interest to get in touch with your lenders.

7. Limit the number of times you check your credit

Lenders view it as a negative indicator when you make frequent "hard enquiries," which refers to requesting loans because it may imply that you are experiencing some form of financial hardship. This will, in turn, be documented in your credit history, which can, as a result, result in a worse credit score for you.

As a result, it's best to avoid submitting an excessive number of applications in a very short time. Instead, you should spread out your applications and only submit them when there is a significant likelihood of acceptance. Before you submit your application, you should consult with an expert. They can identify a loan choice for you that you have a good chance of getting approved for.

8. Don't get rid of your old bank accounts

A common error that many people make is to cut up any credit cards they've paid off instead of keeping them open. If you are working with a financial counsellor, this is a prudent choice; however, if you are trying to enhance your credit rating, it is in your best interest to keep your accounts open. If you can keep an account in good standing without incurring any bad reports, this will seem very favourable to your credit report. A healthy financial strategy includes not missing any payments and maintaining a debt ratio that is as low as possible.

Some people put most of their day-to-day expenditures on credit cards and instantly pay off the balances. This is a sensible strategy for avoiding the accumulation of enormous debt that you will be unable to repay. It demonstrates that you can make responsible use of credit. On the other hand, if this could be too enticing for you, consider not using your credit cards for anything other than making minor payments to keep them active.

Conclusion

These are the most effective methods for naturally improving your credit score. Unfortunately, none of these solutions are a quick fix. They require both time and effort on your part. A positive change, on the other hand, is not only conceivable but also quite straightforward to achieve with the adoption of a new mentality and the cultivation of sound financial practices.

When you have improved your credit score to a level within acceptable boundaries, the next step is to keep it there. If you want a good credit rating for many years into the future, you need to make these good behaviours a permanent part of your life. If you are willing to put in the effort to make all of these adjustments, your financial situation will improve significantly. The Kalculators has the potential to make a significant improvement to your financial situation if we work together. Do not let your poor credit prevent you from living the life that you want to live.

For over 8 years, The Kalculators has been assisting residents of Australia in restoring their credit ratings. Talk with our loan experts as soon as possible about the best ways to raise your credit score. Let's work together to erase the memory of your prior financial obligations.

Frequently Asked Questions:

When you enhance your credit score, how long does it take to take effect?

You won't be able to improve your credit score overnight because you'll need to establish a strong payment history and start building healthy money habits, which will take some time. In the meantime, you can work on repairing your credit score. To begin, you should get a hold of a copy of your credit report and go over it carefully, looking for any mistakes or out-of-date information that could be dragging down your score.

It is possible that you will observe rapid progress if you are successful in having an inaccurate item erased. If your credit score is low, you might discover that it will respond rather rapidly to efforts to turn your financial situation around, such as making on-time repayments and limiting the number of credit products for which you apply for credit. This is good news since your credit score will likely improve quickly.

What happens if I don't have a history of credit?

Your credit history records how you have handled different types of credit, including loans and credit cards. What does it matter if you've never taken out a loan and have a poor credit score? A lender will want proof that you have been responsible with your funds, regardless of how responsible you have been. Applying for a credit card with a low interest rate or one that does not need an annual fee and then making all of your payments on time is one method to get a head start on building a credit history.

What quick ways do I enhance my credit score?

The bad news is that there is no easy solution or fast cut to increasing your credit score. If you have a low score, it may be some time before you see a significant increase in your credit rating. This is especially true if you have a history of credit problems. On the other hand, if you diligently follow the methods outlined above, your score gradually improves.

There is one possible exception to this rule, and that is if your credit report has many inaccuracies that are lowering your score. Getting these errors fixed and removed from your report could have a positive effect on your credit score almost immediately.

Why is it so crucial to have a good credit score?

It may take more time and effort if you do not have a decent credit score to obtain a home loan. Although it is possible to begin with a poor credit score and progressively raise it over time, having a strong credit score from the very beginning can truly help lenders regard you as a reliable person when it comes to your financial matters.

Because of this, it is essential to be aware of it early on and to be cognizant of it right away, as it is possible that by the time the time comes to apply for a home loan, it will be too late. If this happens, you might have to put off starting the process of getting a home loan.

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About the Author / By Kaleem Ulah

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Kaleem is CEO & Author at "The Kalculators". With more than 10 years of experience in financial services, He built Kalculators to transform your financial challenges into strategic triumphs!

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