Credit history is one of those things people forget about until they actually need it. But it’s also one of those things that can’t magically be fixed overnight.
Do you forget to pay your bills on time? Have you just moved out of home for the first time? Are you moving to Australia from abroad? There are many reasons that you might not have a valid credit history but don’t wait until you have credit knocked back to think about improving it.
While your credit file can ring alarm bells with a lender, it can also be your best ally when applying for a loan. Here are our top tips to getting your credit back on track:
- Start small. If you have no official credit track record, start establishing one. A mobile phone plan, electricity account, internet or Foxtel service can be helpful as proof of payment commitments. Make sure the account is in your name and at your residential address – and don’t start signing up to things you don’t actually need!
- Punctual payments. Pay your bills on time. It’s a simple but effective way to establish your reliability in the eyes of a potential lender.
- Job stability. If you have passed the probation period at your current place of employment, you can start demonstrating staying power, particularly if you are new to the country.
- Fixed address. Proof of long-term residential address such as rent receipts can help prove to a lender that you’re not a nomad.
- Becoming buddies with your bank. Start actively building a relationship with your bank. Have your wage paid directly into your bank account and conduct the account properly, avoiding overdue fees.
- Plastic power. A credit card is easier to obtain than a loan, so use this avenue to build up a track record of perfect repayments. Just watch that due date like a hawk and pay off the total in full each month. You don’t want your new piece of plastic to start ruining your credit history instead of improving it.
Why do lenders need my credit history?
Lenders need assurance you’ll pay back the money. Part of their assessment of your credit risk will require them to access your official credit file. Your credit file shows all credit applied for by you, plus all overdue accounts listed as either a default or clearout.
How can I check my credit history?
Checking your current credit history is easy. Simply go to Veda Advantage’s website – www.mycreditfile.com.au. You can request a free copy of your credit history from them, but be aware certain criteria apply and it can take up to 10 days to arrive. If you are in a rush, you can purchase a copy of your personal credit file and it will be posted, faxed or emailed to you promptly. It’s then a matter of keeping your credit reputation in good shape for future use.
Surely there are some shortcuts?
Building up a good credit history requires diligence and takes time – but it will pay dividends in the long run. Yes, you can take a short cut by borrowing through a loan company that takes on higher risk customers, but just remember, you’ll pay for it.
Companies that accept riskier borrowers often charge high fees and set higher interest rates to cover themselves. Fees can sometimes be up to fifty percent of the loan amount, on top of interest, and you could end up paying back almost double the amount you borrowed.
After taking this into consideration, many people decide that for such a small amount, the loan is not worth it. However they still face the problem of needing a larger loan sometime in the future, and before they can do this, they need to build up their credit history. Back to square one! There’s no getting around it, so why not start work on establishing or cleaning up your credit history today?
How do I compare credit cards?
RateCity is one of the best websites to conduct credit care comparisons, whether it’s a low interest card, a rewards card or one with no annual fees.
Compare credit cards and look for the best credit card deals here.