Expert tips for improving your credit
We’re going to look at how to improve your credit so that you can access prime products and services at market leading rates.
Good credit allows a person to borrow money or access goods or services with the understanding that it will be paid back later with interest. If you have bad credit chances are that if you can access a loan you will have to settle for a higher interest rate.
Creditors grant credit based on your credit score which tells them if you can be trusted to pay back what you borrowed, along with any interest and charges that may apply. It is vitally important to understand how credit works and use it wisely, it can help you reach your goals and avoid having too much debt.
How does credit work?
In Australia, before you’re granted a loan the lender will firstly look at your credit history including your record of borrowing and repaying funds. Your credit record is compiled in a file known as a credit report, compiled by independent credit bureaus. The information covered in a credit report includes:
- The credit cards you have, their borrowing limits and current outstanding balances.
- The number of loans you have taken, the value of these loans out and how much of them you’ve paid back.
- Whether your monthly payments for your bills and accounts were made on time, late or missed altogether.
- Details of financial setbacks such as mortgage foreclosures, car repossessions and bankruptcies.
The reasons you need good credit
Good credit is necessary when you want to borrow money for major purchases, such as a car or a home or you want to take advantage of the convenience and purchase protection a credit card can provide.
Good credit is determined by a credit score that distils the information on your credit reports to something that’s easy to interpret and does so in a fair way that minimizes the possibility of bias.
The benefits of good credit
Credit allows you to buy things when you need them rather than having to wait until you have money. It gives you the flexibility to act on major purchases and life opportunities that may require more money than you have on hand currently.
You easily get service from local utility companies or rent an apartment. You can buy everything you want anytime and anywhere. You can also benefit from low interest rates on everything from a mortgage and car loan to personal loans and credit cards.
Your credit score is a financial tool
When you want to be involved in anything that has anything to do with loans, you should have a good credit score because it is the only thing that will determine whether you’re approved for credit and the rates that you can secure.
- Insurance companies use your credit score as a factor in determining your premiums.
- Utility companies check your credit score before deciding to let you open an account or borrow equipment.
- Most landlords check your credit when deciding if they’ll rent you an apartment or property.
- Your credit report can also be used to verify your identity and for other purposes defined by federal law.
Types of credits you can find in Australia
There are various credit types you can find in Australia. However, these credits depend on the quality of your credit score. Having a better Equifax credit score is advantageous as you get exposed to amazing deals with low-interest rates.
With revolving credit, you are given a maximum borrowing limit, and you can make purchases up to that limit. You can pay any portion of your outstanding charges, up to the full amount monthly.
The companies provide you with their services each month with the understanding that you will pay for them after the fact. It is a contract with service providers such as gas and electric utilities, cable and internet providers, cellular phone companies, and gyms.
They are used as credit cards, but they do not permit you to carry a balance, you are expected to pay all charges in full every month. Charge cards are mostly issued by retailers for use exclusively in their establishments.
This is a loan for a specific sum of money you agree to repay, plus interest and fees, in a series of equal monthly payments for a certain period. Examples of instalment credit include loans and mortgages.
Credit is risky so spend wisely & avoid overspending
Swiping for everything and putting it on credit is not as exciting as it seems. You should never borrow more than what you can afford. Failing to make your payments on time, will damage your credit record. In addition, you will waste money on late fees and having to pay additional interest which will result in difficulties getting loans or credit in the future.
Ways to improve your credit in Australia
Having bad credit will affect you throughout your lifetime. There are certain things you will be prohibited from such as getting certain loans including home loans. When it happens, you may still get a loan but you will suffer from high-interest rates.
Improve your credit today by:
- Keep track of your credit - regularly check your credit report. You can get a free credit report annually.
- Pay your loans and bills on time – it’s better to set up direct debits and schedule loan repayments on your payday. Because when you miss your repayment date this will affect your credit.
- Keep track of your credit commitments - know what you need a loan for before applying for credit and keep track of your credit commitments. Avoid making numerous applications since it will be recorded on your credit file and is not always looked upon positively by lenders, as it may be an indicator that you’re in credit crisis.
- If you move to a new house or update your contact details, notify lenders - give your credit provider your new email or physical address so they can re-direct bills to your new address. Failing to pay these bills will result in a credit infringement or overdue debt and could be listed on your credit report.
- If you have trouble meeting repayments - it is always a wise decision to talk to your credit provider about everything that might affect your repayments even when you are struggling to meet the minimum instalment to draft a new repayment strategy rather than running away from them.
Factors that impact your Equifax score
- The type of credit you’ve applied for - different loans carry different levels of risk.
- The number of credit applications you have made - every time you make a loan application it gets added to your credit report.
- The credit limit or size of the loan - different loan levels carry different levels of risk. Hence, you should only apply for an amount that you need.
- The type of credit providers you’ve applied for credit with - each credit provider facility has it’s a level risk regardless of which one you are approaching. It could be a bank, a peer-to-peer lender, the store finance providers that allow you to buy now and pay later, hire-purchase or a phone or utility company.
- The age of your credit file - the age of your credit history may impact your Equifax Score. A new credit file may show a higher level of risk than one that has been established for many years.
Improve your credit score – Today!
Improving your credit makes your finances easier, more enjoyable and will help you save money. When you have good credit, you are at an advantage and can get anything you want at a very affordable rate compared to people with bad credit.
You can be stress-free and will likely enjoy finding loans and credit cards easily.