Your credit score plays a crucial role in many of the major life decisions you make. From buying your first home to a new car, you won’t get far without a good credit score when you need to secure a loan.
Let’s take a look at some reasons why your credit score might not be at its best, and check out some tips on how to improve it!
It can be easy to lower your credit score without intending to - it only takes one missed repayment to begin chipping away at all your hard work, no matter how financially sensible you are most of the time.
Here are a few factors that can reduce your credit score:
Late or missing loan repayments - failing to meet a scheduled payment, whether with a bank or another lender, damages your score. Every missed repayment has an impact.
Multiple credit enquiries - checking your credit score regularly within a short space of time, or applying for several credit cards simultaneously, can lower your rating. This is because it indicates to lenders that you may be under financial stress.
Writs, summons and court judgements - if you are required to appear in court to settle a debt, this will be listed in your credit file.
Don’t worry if any of the above factors apply - you will still be able to get a loan in most cases! But boosting your credit score could enable you to borrow more and secure a more competitive interest rate, so why not take some of this guidance onboard to improve your rating?
1) Update your repayment schedule
Missing a few repayments isn’t the end of the world - but getting back on track is important to bumping your credit score. The longer you pay your bills on time after being late, the more your score should increase. Older credit issues count for less when calculating your credit rating, so missed repayments won’t haunt you forever!
To get into good habits, dedicate a portion of your income to repaying your debts before you account for any other expenses. Also, if you need to adjust this figure as your income changes, contact your lender to explain your position. This will help to avoid bad credit going forwards.
2) Use credit cards responsibly
Credit cards don’t lead to debts and bad credit - using them unwisely does. In general, having a credit card that you use regularly for small purchases and using instalment payments (such as through apps like Afterpay) will rebuild your credit score if you meet all the repayments. Someone with no credit cards is actually a higher credit risk than someone who is proven to be responsible!
Where possible, however, try to minimise the number of credit cards you have active at once. Having more than a few lines of credit could indicate that you're struggling to keep on top of payments in your day-to-day life with your income alone. This would dissuade lenders from offering you a competitive home or personal loan.
3) Get specialist help
If, after following the above advice, you are still having trouble making ends meet, see a legitimate financial counsellor or expert in finance credit. This won't rebuild your credit score immediately, but if you can get some expert guidance tailored to your repayment history and finances, your credit rating should recover. Seeking assistance will not impact your score.
If you want help with improving your credit score, why not give our team a call today?