Credit Rating Survival Guide: Monitor and Improve Your Score

Topics: Reading time: 4 minutes

Dealing with anxiety and stress about your credit rating is a common experience, but it doesn’t have to be your reality. Let’s face it, a low credit rating can even be embarrassing at times. While many people can laugh off most awkward incidents in life, there are never any “hilarious” anecdotes about being refused credit or a mortgage approval.

Most people do not find the subject of being refused credit remotely funny. This is most likely because credit ratings were cloaked in a veil of mystery until recently. Even if you believe you have a strong credit rating, it is still possible to be met with a rejected application.

In reality, a lot of people are blissfully unaware how their credit score is calculated, what it means, and how they can access the information. That leads to being intimidated by the thought of applying for credit or even just taking a closer look at your finances.

In this credit rating survival guide, we’ll give you some valuable tips on understanding and maintaining your credit rating. It’s time to improve your score with confidence.

How Do I Review My Credit Rating?

You wouldn’t pay a bill without looking for it first or accept a job without knowing the pay, would you? Similarly, you shouldn’t turn a blind eye to your credit rating. Taking the time to regularly monitor and check in with your full credit file is a great way to know exactly where you stand.

Using a tool like My Credit File will help you obtain a free copy of your credit file within 10 days. Remember, you’re legally entitled to one free copy of your credit report each year. Take advantage of this, and also take steps to stay up-to-date with your credit as it changes.

Making Sense of Credit Ratings

Shopping might be fun, but understanding how your credit rating works can be complicated. At the end of the day, you are responsible for your own finances. In order to plan for important financial decisions, such as trying to buy your first home, it is important to be credit savvy.

In Australia, your credit score or rating is used to help lenders decide your credit worthiness. The number itself is based on an analysis of your credit file. Since September 2018, additional information was added to your credit report that includes new factors to give a more well-rounded view of your lending and financial history. Here are the factors that affect your credit rating:

  • Payment history – Do you make repayments on time or are you constantly late?
  • Your debit/credit ratio – How much credit are you using? The lower, the better.
  • Credit duration – How long have your lines of credit been open?
  • New credit – Do you often apply for new loans or other lines of credit?
  • Type of credit – The types of credit also matter, such as a mortgage, auto loan, or credit cards.

Using these things above, your credit score will be calculated to give you a number between zero and 1,200. There’s a 5-point scale from there ranging from below average to excellent that will help lenders know whether you’re a strong candidate for future credit.

How Do I Improve My Credit Rating?

Even if you discover your credit rating isn’t as high as it should be, you have options. There are many ways to start improving your credit rating. It helps to avoid a lot of the common pitfalls like late payments, taking on more debt than you can afford, and not budgeting.

Here are some additional tips that will help you improve your credit rating no matter where you stand.

  • Set reminders – Setting calendar reminders on your smartphone or tablet that let you know when bills are coming up will help you stay on top of your due dates. Paying your dues on time will earn you brownie points with the central credit reporting agency.
  • Stay in the black – Likewise, check your balance regularly and don’t overdraw funds. Not only will this incur fees that will add up over time, but you could easily end up unable to afford repayments.
  • Manage your debt to credit ratio –  Even if you earn a good salary, if you have spent more than the limit on your card, then you’re considered to be a risky customer. Just because you have plastic in your wallet doesn’t mean you have money to spend.
  • Shop around – If you’re in the market for a new credit card, make sure you shop around for the one with the lowest long-term fees. Finding one with added perks could help maximise savings.
  • Pay consistently – Paying your bills and credit each month shows your bank you’re a reliable client. In addition, be reliable with old accounts and keep them open for as long as possible, even if you’re not actively using them.
  • Check for errors – Did you know that according to the Australian Information Commissioner, at least 30% of us have errors on our credit file? Take the time to rectify these costly mistakes.
  • Stay put – The more you change jobs or addresses, the bigger the impact will be on your credit rating. You may not be 100% happy with where you are living, but if staying where you are brings you one step closer to getting a great deal on a mortgage, there’s a lot of long-term gain you would benefit from.
  • Save money – No matter how small the amount, putting money away on a regular basis will show the bank that you are good with your finances.

With a combination of the above, you be able to clean up your credit history and you’ll also create some sustainable financial habits for life. Once you have demonstrated you are a diligent credit citizen, you’ll have more choices when it comes to choosing lenders, lowered interest rates, and additional lines of credit.

Achieve a Clear Credit Rating

While credit can be intimidating, it doesn’t have to get in the way of your life. Learning how to understand your credit rating and history and how to put that knowledge to work for you will bring you closer to your financial goals.

If you need help improving your own credit score, you don’t have to take these steps alone. Chat with us for more help with improving your credit score. Our proven debt solutions can help you clear your debt and improve your credit score over time.

We’re here to help! Fill in the enquiry form below so we can call you at a convenient time, or start a web chat with us via the icon in the bottom right, or call us now on 1300 368 322.

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