How to improve a credit score in Australia?


If you're wondering "how to improve my credit score fast", you've come to the right place. The following tips to improve your credit rating will help get you financially fit to apply for credit. 

Let's get to the following commonly asked questions:

  • How does credit work?
  • What's a good credit score?
  • What are the consequences of a low credit score?
  • How to boost your credit score?
  • How long does it take to fix your credit score? 
  • What can I not change or remove?

Q1. How does credit work?

Anything from a credit utilisation ratio to paying bills on time might be affecting your credit score, and a credit file accumulates that payment history and debts. 

You can check your credit score from a credit-reporting agency. Scoring ranges differ between credit bureaus. You'll need to enter personal details and pay an annual fee to see your credit score in Australia more than once a year.

Q2. What's a good credit score?

Credit scoring differs between credit providers. For example, Equifax deems 670+ a good range, while Experian believes 881+ is good. 

Your credit report will detail what impacts the credit score. Look at your finances and consider areas you can begin building credit.

Q3. What are the consequences of a low credit score?

Bad credit isn't necessarily a death sentence, and you can quickly bounce back. However, it can impact the chances of applying for a mortgage or new cards from credit card companies. 

A low credit score ranges between one and 600, although it depends on the credit reporting body. Read on to find out what affects your credit reports.

Q4. How to boost your credit score?

Follow our tips to build your credit score and get financially fit.

Pay your bills on time

A late payment or if you miss payments, stay on your credit history for up to seven years. To avoid missing payments, set up an automatic monthly repayment from your transaction accounts. 

Make frequent payments

Paying regular small home loan repayments will clear your overdue debts more quickly. Use a repayment calculator to determine how much extra you can make. 

Speak to your credit provider about making fortnightly payments. The same goes for your auto loan or student loans. Reducing debt will have a major impact on your score.

Consolidate debts

If you have multiple debts, for example, a car loan, personal loan, or credit card repayment, you might consider debt consolidation. A balance transfer of all credit products and loan amounts into one type of credit is good for credit repair.

Important: Before attempting to consolidate your debts, check comparison rates and seek financial advice.

Fix mistakes

If you have a poor credit score, check any negative information against your bank account. Speak to a credit reporting body about false red flags on your loans or credit accounts.

Avoid applying for new credit

Avoid making too many credit applications. When you apply for credit, lenders perform credit checks, and this type of hard enquiry causes your score to dip. If you don't meet lending criteria or are at a higher risk level, they may reject your credit applications, damaging future chances. 

Keep credit cards 

Maintaining hold of your credit cards and paying off card balances each month will help raise your credit score. In addition, keeping accounts open will improve your credit utilisation rate if you can manage credit card debt.

Lower credit limits 

Speak to your card issuer about lowering the limit of your credit card. If overspending is a problem, avoid increasing your credit limit even when your credit score has improved.

Demonstrate stability

Avoid hurting your credit score. One of the best ways of improving your credit score is to maintain stability. 

  • Become an authorised user on someone else's account.
  • Maintain your saving accounts and super funds payments.

Q5. How long does it take to fix your credit score? 

After you have a copy of your credit score from a credit repair company, then you can begin fixing your credit. Improving credit won't take long if errors have negatively impacted your score. 

According to Experian, it can take anywhere from a few months to several years to repair a credit score. 

Note: If missed payments from financial hardship are at fault, try credit monitoring to prevent it from occurring again.

Q6. What can I not change or remove?

Sometimes, you can do nothing to fix credit other than wait and continue making on-time payments. You can't change:

  • Payments made in the last two years.
  • Overdue charges of $150 or more.
  • Applications for a credit account or financial product from the previous five years.

In summary

The best way to improve your overall credit is to avoid anything that could hurt it. For instance, if you know overspending is an issue, avoid credit card increasing the limit on your card. Ultimately, repairing credit can take several months or even years. 

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Disclaimer: The author is not a financial advisor and the information provided is general in nature and was prepared for information purposes only. This article should not be considered to constitute financial advice. Accordingly, reliance should not be placed on this article as the basis for making an investment, financial or other decision. This information does not take into account your investment objectives, particular needs, or financial situation.

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