5 ways to boost your credit score

5 ways to boost your credit score

The question, ‘How’s your credit rating?’ or ‘What’s your credit score?’ can fill people with dread. A lot of this stems from not understanding what makes a positive credit score and what can turn it into a negative one. Here’s 5 ways to boost your credit score.

In this article, let’s discuss how Australia’s credit scoring system works, what positive and negative actions look like, and finally some practical steps to ensure you have a positive credit score.

This is how Australia’s credit-scoring system works

Australia operates under a system called ‘comprehensive credit reporting’, which means banks and other credit providers (such as utilities and telcos) have to report all your positive and negative credit actions to the three main credit bureaus – Equifax, Experian and Illion.

  • Positive actions include paying off loans, making loan repayments on time and paying bills on time
  • Negative actions include defaulting on loans, falling behind on loan repayments and falling behind on bills

The credit bureaus keep a record of how you manage credit – which is known as a credit report. They then use this information to grade your ability to manage credit – which is known as a credit score.

In simple terms, all your credit actions are reflected in your credit score. If you want to improve your credit score in 2022, you need to maximise your positive credit actions and minimise your negative credit actions.

Here are five steps you can take:

1. Show you’re good with loans

This may sound obvious, but when you take out home loans, car loans, personal loans and other types of loans, it’s important you make all your repayments on time and eventually pay off the debt. This reassures lenders you’re good for future loans.

2. Show you’re good with bills

Paying your electricity bills, water bills, internet bills and other bills on time, builds your reputation as a reliable consumer.

3. Show you’re good with credit cards

From a credit score perspective, having a card is generally better than not having one, as it’s a running example of your ability to manage credit – assuming you make your repayments on time. Paying off your entire debt in full each month is a more positive credit action than just making the minimum repayment.

4. Show you’re on top of your finances

Frequently applying for new loans, credit cards and phone plans could give the impression that you are financially irresponsible. There’s nothing wrong with applying for credit from time to time, but if you want to maximise your credit score, you need to limit the number of credit applications you make.

5. Show you’re stable

Moving from job to job and rental home to rental home indicates you could potentially be in an unstable position, and banks don’t like lending to instability. If you want to maximize your credit score, limit your employment and address changes.

Some final thoughts

The good news is that doing more credit-positive actions will deliver two big benefits.

The first benefit is that you won’t have to pay late fees or penalty interest. Second, it will increase lenders’ willingness to offer you better loan products, lower interest rates and more enticing deals.

Finally, don’t forget you’re entitled to a free copy of your credit report (one free copy per year). This can be a really helpful thing to attain because it might contain errors that are unfairly impacting your credit score. If your credit report contains negative entries that are accurate, there’s nothing you can do. But if it contains negative entries that are inaccurate, you can apply to have those errors removed.

To discuss other ways to help your credit score, or to get help obtaining your credit report, contact Finestream today.