Are you looking to take out a home loan but are worried about your credit score? Whether you’ve checked already or have a feeling that it might not be that high, you’re likely wondering if there’s anything you can do to boost your score. Though it won’t happen overnight, there are a few things you can do to improve your credit rating and make yourself a more desirable candidate to lenders. Not only will a good credit score help you secure a loan, but you also have a higher chance of accessing lower interest rates too. Check out our guide on ‘How to improve my credit score’ below for some tips and tricks.
Want to discuss ‘How to improve my credit score’ with a financial consultant? Chat to Oak Tree Finances today to see what you can do to prepare yourself for a home loan.
How to improve my credit score
Improve my credit score #1: Have a credit card
Though you’d think having no credit card is better when it comes to showing how good your financial health is, it’s actually better to have one. This is because measured credit card use and a history of paying it on time shows that you can effectively manage your debt and will be responsible with repayments. If you find yourself spending using your credit card a little too often, consider cutting it back to manageable limit (i.e. $1,000).
Improve my credit score #2: Pay your debts on time
Not paying back your debts in time will cause the biggest blip on your credit score, as it will cause defaults on your credit report (especially if the bill is $150 or more). If you find yourself forgetting to pay, it’s worth setting up automatic payments to ensure your bills get paid on time, every time. For bills that are a little trickier to manage, such as utility bills, discuss whether it’s possible to receive your bill notices electronically rather than mail. This will make it easier to remember, as it serves as a reminder every time you open your email.
Improve my credit rating #3: Don’t miss a payment
Missing even just one payment can have a significant impact to your credit score, causing it to drop by up to 22%. That number climbs almost doubles if you miss more than three in a short span of time. These black marks on your credit report will last for two years, with any debt collection remaining on file for your five years. If your payment has taken more than 14 days to be received, it’s considered a missed payment – 60 days or more is a default on your report.
Improve my credit rating #4: Avoid making too many applications
Shopping around for multiple credit providers can significantly lower your score, as it notifies lenders that you’re a risky borrower. This is because it means you’re either not seen as a desirable candidate to other credit providers, or that you require many credit cards to support your finances.
How to improve my credit rating #5: Check your credit score online
Checking your credit score not only helps you see what areas you need to improve, but it’s also a good way to check if all the information is correct. If there are inaccurate debt listings, repayments that haven’t been recorded, or fraudulent activity, this can all heavily impact your credit score. You can then contact your chosen financial institution to rectify these mistakes and ask them to make changes to your report. You can find out your credit score by using Equifax, Experian, or TransUnion.
How to improve my credit rating #6: Have a stable job and rental history
Above all, a lender wants to see that you’re reliable and stable – and a strong job and rental history reflect this. If you’re constantly jumping from one job to the next, or can’t seem to settle into a home, a lender may view you as an unsuitable candidate. This is because you might seem like a person who finds themselves out of work or in a position where you might not be able to make payments.
*This content is intended as general advice only and does not consider an individual’s circumstances. Please do not act upon any of the information contained here within without speaking to your home loan broker or financial advisor beforehand.
Implementing these steps can help improve your credit score over time, but if you’d like further guidance, you can contact Oak Tree Finance to arrange a consultation with an independent mortgage broker. You can also call us on 0404 403 066 or email loans@oaktreefinances.com.au and we’ll be in touch with you shortly.