How to Improve Your Credit Score

Online Loans

October 22, 2020

Looking for finance? A healthy credit score is vital. If you’re over 18 and have had a bill in your name, you should have a credit file. This could be a phone plan or even a utility bill.

High credit scores increase the likelihood of loan approval and provide access to lower interest rates.

Credit Score Explained:

Located within a credit file, these are usually on a scale from 0 to 1,200, depending on the reporting agency.

Put simply, the higher your score, the better your repayment history and more reliable you are in the eyes of financial institutions. The average credit score in Australia is between 622 – 725.

How are credit scores calculated?

Scores in Australia are based on:

  • The amount of money you’ve borrowed or tried to borrow
  • The number of credit applications you’ve made
  • Your repayment history: whether you pay on time
  • Age of file: a longer repayment history means a stronger score
What else is in a credit file?

Also known as a credit report, they contain:

  • Your address & age of file (i.e. time since first obtaining credit)
  • Credit Score
  • Any insolvencies / court actions / missed payments (defaults)
  • Repayment history
  • Credit application & enquiry history
  • Businesses you may own or are a director for
Here’s how to improve your credit score
1: Never Miss Payments

Financial institutions want to see consistent repayment history. This shows whether you’re likely to make repayments in the future.

Solution:
Ensure all your current bills & repayments are up to date. If you have a current loan or service provider and worry about making a repayment on time, contact the company and explain the situation.

2: Avoid Multiple Enquiries

Each time you make a formal credit enquiry, it will cost your score. Multiple enquiries in a short period of time can lower the score even more.

*An enquiry is when you formally submit a credit application to a lending institution. OnlineLoans is NOT a lending institution.

Solution:
Get a quote before submitting a loan application. You’re always provided with a quote from OnlineLoans BEFORE submitting your application. A quote won’t affect your credit score.

3: Build Your Credit Score

The age of your credit file adds to its strength. Younger or ‘newer’ credit files are more susceptible to heavy score hits.

Solution:
Avoid applying for large loans when your credit file is ‘young’. Consider building your credit history by completing a small loan, like a phone plan first.

4: Size & Type

Requesting to borrow large amounts of money can result in larger hits to your credit score. Whether approved or not, the enquiry still reduces the credit score.

Different lenders have different risk calculations and deal with credit scores differently. For example, a traditional bank compared with a non-traditional, niche lender.

Solution:
Think about how much you need and don’t try to borrow beyond your means. If in doubt, try a loan calculator first – these don’t require any personal information.

5: Ensure All Details are Correct

It’s important to make sure all your details are correct on your file. As all credit providers in Australia provide information to reporting agencies, sometimes errors can occur.

Solution:
Obtain a copy of your credit file from an agency like Equifax or Experian. Check your details are correct. You’ll need to follow their processes if corrections are needed. Viewing your credit file DOES NOT affect the score.

FAQS
How do I get my credit file?

– Agencies like Equifax can provide you with a copy of your credit file.

*Viewing your credit file DOES NOT affect the score.

Does declaring bankruptcy affect my credit score?

– Yes. This typically lowers a credit score and can exclude you from credit.

What happens if my score is low?

– Lenders look at low scores unfavourably and you may have to consider different options from traditional lenders. Interest rates can typically be higher.

If I change address, how does my credit file know?

– It won’t know until you apply for finance again. You can also update your personal information through reporting agencies like Equifax.

Do criminal charges/convictions affect credit score?

– No, generally this doesn’t affect credit score depending on the conviction. However, they can be visible on credit files.

Ready for the next step?

Once you have improved your credit score, you can now apply for a loan and get a higher chance of approval. OnlineLoans can assist you to start your car loan application and get you the best deals for your next car!

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