Firstly, we need to know what we’re dealing with here. You’re entitled to one free credit report every 12 months or within 90 days of having your credit application rejected. This way you can see what is helping or hurting your score so you can come up with a credit repair plan. Keen to get the ball rolling? Ask us how to check your credit score.
So now you’ve got your credit file, but unfortunately it looks like a Frankenstein’s monster made up of maxed out credit cards and late repayments, or maybe it’s just not as schmick as you were hoping for. Don’t panic because this can be fixed. Check your file and make sure all the information is correct. If you find a mistake which impacts your credit score, make sure you dispute it so that it can be corrected.
Now that your credit file is accurate, it’s time to come up with a financial plan to optimise your rating (don’t worry, there are plenty of resources to help). It’s easy to forget to pay a bill, we’ve all been there, but you need to be careful because not paying your bills on time can really harm your credit rating. Fortunately, this can be fixed with a bit of time and organisation. Start paying your credit card, loan and utility bills on time and your score will improve. Remember that missed payments will stay on your credit report for two years. Creating healthy habits like setting up direct debit payments or putting calendar notifications for when bills are due will go a long way to helping you get that kickass credit score.
Having a ‘just-in-case’ fund is a good way to stop relying on your credit cards for unexpected expenses. Not only does having some money put aside give you piece of mind, but it also gives you the means to always pay your bills on time. It’s also a much better option than getting a payday loan, which might seem like a quick fix, but has a lot of fees and is more expensive in the long run.
Everyone wants to know that they’re getting the best rate available but shopping around for credit can severely harm your credit score. Every credit application you make is added to your file. Don’t make any more credit applications while you’re still paying off other lines of credit. If you make too many back-to-back applications, it could be met with scrutiny from lenders as each additional credit enquiry lowers your credit score.
If these words are too little too late and you already have several credit cards maxed to the limit, don’t fret, it can still be fixed. Try and get your credit cards repaid on time and then lower the limit. If this seems an impossibility to you, contact your bank (we promise they won’t bite) and ask them to help you come up with a repayment plan.
Having credit is like drinking wine, the occasional glass drunk in moderation is a very nice thing to have but, drink too much you can find yourself with a severe headache. Evidence of well managed debt does wonders for your credit score and having a credit card is a great way to demonstrate this. This means prompt and on-time repayments. If you know that you’re not good with credit, cut your credit limit right back and only make purchases that you know you can actually afford.
Consistency in both your employment and residential address can improve your credit score. The algorithms to calculate credit score are based on “risk” therefore, stability in these two aspects of your life is seen to reduce the risk of defaulting. Basically, lenders want evidence that you’re a stable character who will meet your commitments.
If you have multiple debts sometimes it’s a good idea to roll them into one consolidated loan. This can make managing your repayments easier. It’s important to do your research before you do this. Compare the interest rate for the new loan, as well as fees and extras against your current loans. If it’s not cheaper for you in the long run, there’s no point in doing it.
If you do decide to consolidate your debts be very careful about paying refinancing companies to do it. Do not apply for a credit facility or hand over any of your credit information before you research, ask questions and decide if you will be eligible for the product and whether or not it suits your requirements. Talk to your current credit providers about changing repayments and options for consolidating.
So, you’ve read all the advice and it just looks way too hard. We understand that oftentimes things happen in life that means you get behind in your repayments or rack up debt that’s hard to pay off. In times like this its good to ask for help. There are many community organisations and government agencies that offer free financial counselling. They can help you create a financial plan that will get your credit score back on track.
Whilst these are some ways to improve your credit score, none of them are a quick fix. Creating healthy financial habits takes time and effort - but trust us, it’s worth it! The higher your score the better the rates and deals you can get on future loans.