Convincing a bank to lend you their money is never an easy tasks but a necessary one. Whether you’re after home loans, credit cards or personal loans, you’re going to need a good credit report that will support you in your application for finance.
It’s a little concerning then, when the latest report from credit reporting agency Veda showed over 2 billion worth of credit applications were deemed as being high-risk in the past financial quarter alone.
The report highlighted that red-flagged applications had grown 52 percent in the past two years – a scary fact for those legitimate borrowers who are looking to apply for a loan.
So we contacted Veda directly to get a few tips from them on how best to build your credit profile in this high-risk lending environment.
Build a credit history
Getting yourself a credit card is a simple way to kick off your personal credit report. Companies will use your history with credit cards to judge how well you will deal with debts in the future. You don’t want to go off the rails, spending with reckless abandon. Instead, use the card responsibly and demonstrate that you can be trusted with such an instrument.
Make sure you’re paying off the balance regularly to keep interest at bay. Not only will this show that you can be trusted with payments, but it will help you keep the overall repayment costs down too.
Belinda Diprose, marketing manager of credit reporting agency Veda, advised, “Only apply for credit if and when you need it. Credit comes in many forms, from credit cards, phone contracts and interest free loans.”
Be diligent with all payments
The fact is, from the moment your name is attached to any type of finance, it could affect your credit score. As soon as your name starts appearing on the bills, making mistakes can start to cost you.
“Paying your personal loans, mortgage, and credit cards on time does matter, so consider setting up direct debits and have loan repayments scheduled for your pay day,” Diprose suggested.
Pay off those debts
If you’re at the step of looking at home loan comparisons, it’s likely you’ve already got a few debts of various sizes to take care of. Try to pay these off so you have fewer outgoings. Put the smallest debts or your debts incurring the highest interest rate charges at the top of the priorities list and see if you can eliminate them once and for all.
And remember, if you need help don’t forget to ask for it.
“If you are in financial difficulty talk to your credit provider, they can possibly assist you,” Diprose said.
Don’t over-apply for credit
One mistake that can affect a borrower’s credit report is applying for credit with too many lenders.
“Making a number of applications in a short space of time could be an indication you’re in credit stress,” Diprose advised.
“Do your research to compare providers before making your application for credit.”
Check your own credit report
If you want to know the state of your credit report – before the lenders – order your own credit report.
A credit report and rating can be obtained online at Veda by providing your full name, date of birth, driver’s license number, current and previous address and forms of identification to help them collect your credit history. In most cases, you will be entitled to this report for free.
Avoid silly credit defaults
Moving house? Don’t overlook the mandatory change of address notifications.
“Advise lenders and utility providers of your new address so they can re-direct bills,” Diprose said.
Otherwise you could run the risk off not receiving your bills, which could put you in the red and in credit strife.
Whatever your loan requirements, your credit report is a vitally important part of the lending process, so make sure you do your best to follow these steps so that nothing is holding you back from reaching your financial goals.