How to repair your credit score

How to repair your credit score

Swiping your credit card to buy that new laptop may have felt great in the moment but your lender doesn’t care that your purchase improved your happiness; they care that you pay your monthly invoices – with interest.

Having a bad credit score can sometimes feel like a life sentence. However, there are ways to get your credit score back on track.

If you want to find out your credit score, click here.

If you’ve got bad credit and want help, click here.

What is a credit score?

A credit score is a rating that reflects your history of managing credit – things like credit cards, personal loans, phone plans and other types of loans or buy-now-pay-later schemes.

A high number means you’ve got a good history of managing credit, which means banks should feel confident you will repay any loan they might give you.

A low number means you’ve got a bad history of managing credit – therefore banks might regard you as a risk and be unwilling to lend you money.

Click here to check your credit score.

What is a credit report?

A credit report is a document that outlines your credit history.

It includes information like how many loans you’ve applied for, how successful you’ve been at repaying those loans, and any defaults or bankruptcies.

A credit report also includes personal information such as your date of birth, address and employment history.

Click here to check your credit score.

Check for mistakes

It’s not uncommon for credit reports to contain mistakes. One of the most common errors can involve your name being credited with the debt of a family member or stranger with a very similar name to yours.

Australia’s financial services regulator, ASIC, provides a detailed explanation on how to fix incorrect information on your credit report, and how to contact an ombudsman if you need help.

Five steps to improve your credit score

  1. Get the most up-to-date version of your credit score
  2. Check for mistakes
  3. Pay off your existing debts
  4. Completely cancel your credit card
  5. Add positive information to your credit report

Click here to check your credit score.

Pay off your existing debts

This may seem like an obvious step but it’s very important for getting your credit score in order.

If you have multiple sources of debt (credit card, car loan, personal loan, etc) you should budget to pay it off. Once you know how much you owe, you should set money aside to pay one debt off at a time, starting with the debt with the highest interest rate. If you have any additional cash left over at the end of your pay cycle, it might be a good idea to put it towards the debt as well.

If you have troubles paying your bills on time, you can set up a direct debit with your bank so your credit card and other bills are paid before the due date. Putting your payments on autopilot removes the stress of having to remember multiple debit dates for various bills.

Mobile banking apps

Mobile banking apps such as Pocketbook also help users pay off existing debt by detecting regular bill payments, notifying you of upcoming bills and auto-categorising your transactions. Their ‘Safely Spend’ feature helps you limit your weekly or monthly spend, so you can budget without stress.

Completely cancel your credit card

istock_79305201_small5

Paid off your outstanding credit card debt but don’t trust yourself to keep using the card? It’s time to give it the chop.

While physically cutting your credit card up may be a therapeutic and symbolic way of removing it from your life, you’ll need to close off your account completely to ensure you don’t further damage your credit rating.

If you have a rewards card, once you’ve paid the outstanding balance you’ll want to transfer any existing points to your frequent flyer account and/or redeem the reward points. Then you should contact your lender to advise you want to cancel. Your lender may approve your cancellation over the phone by confirming your identity, although some may request a written cancellation request. If they do not take phone cancellations, simply write to your lender advising you want to cancel and close the account, including your credit card number and account details in the letter. You should receive a cancellation confirmation via mail.

It is also crucial you cancel all direct debits linked to your credit card as this can reactivate your cancelled card. Once the account is well and truly closed, you can destroy your credit card.

Would a card with a lower interest rate or higher amount of interest-free days would suit you better? Compare different credit card options now.

Who offers credit reports?

Australia has four different credit reporting bureaus, all of which offer credit reports. They are:

  • Equifax (formerly Veda Advantage)
  • Experian
  • Illion (formerly Dun & Bradstreet)
  • Tasmanian Collection Service

Click here to check your credit score.

Add positive information to your credit report

There are various ways you can show creditors you are a reliable borrower. But did you know there are also ways you can show lenders you are reliable, without paying off debt?

Lenders look for stability in your personal and financial life. If you:

  • are married
  • are a homeowner
  • have lived at the same address for several years
  • have been with the same employer for several years

…these factors all reflect positively on your credit record. If you believe that this information has not been included in your report, you can notify credit reporting agencies to include it.

Stay on course!

istock_79305201_small5

You’ve paid off your debt and you’ve cancelled those tempting credit card accounts – congratulations!

Moving forward, make sure you maintain the good habits you’ve developed while repairing your credit history. Keep track of your transactions, budget and save effectively, auto-pay your bills and try to show lenders you have a stable financial and personal life.

Want to find out your credit score? Click here.

Got bad credit and want help? Click here.

Did you find this helpful? Why not share this article?

Advertisement

RateCity
ratecity-newsletter

Money Health Newsletter

Subscribe for news, tips and expert opinions to help you make smarter financial decisions

By submitting this form, you agree to the RateCity Privacy Policy, Terms of Use and Disclaimer.

Advertisement

Learn more about credit cards

How easy is it to get a credit card?

For most Australians, there are no great barriers to applying for and getting approved for a credit card. Here are some points that a lender will consider when assessing your credit card application.

Credit score: A bad credit score is not the be all and end all of your application, but it may stop you being approved for a higher credit limit. If your credit score is less than perfect, apply for the credit limit that you need, rather than the one you want.

Annual income: Most credit cards have minimum annual income requirements. Make sure you’re applying for a card where you meet the minimum.

Age & residency: You need to be at least 18 years old to apply for a credit card in Australia, and most require that you are an Australian citizen or permanent resident. However, there are some credit cards available to temporary residents.

Do you need a credit card to get a loan?

You do not need a credit card to get a loan, but you usually need to have a credit history. Without a credit history, a financial institution cannot assess your ‘credit worthiness’, or your capacity to pay off the loan.

If you don’t have a credit card, your credit history can reflect any record of paying off an asset. Without any credit credit history, you’re limited in the type of loans you can apply for. But you may be able to obtain a secured loan against an asset. For more information on improving your credit score, go here

What should you do if your credit card is compromised?

Credit card fraud is a serious problem. If your credit card is compromised and you’re wondering what to do, here are a few precautionary steps to take.

Contact you credit provider – Get in touch will your credit card provider. If you feel your card has been compromised, you should be able to lock or block it.

Monitor your accounts – Keep an eye on your credit card accounts. Any unauthorised transactions could be a sign your credit card has been compromised.

Check your credit rating – It’s also important to check your credit rating, to ensure you’re not a victim of identity theft or some other financial mischief.

How do you use credit cards?

A credit card can be an easy way to make purchases online, in person or over the phone. When used properly, a credit card can even help you manage your cash flow. But before applying for a credit card, it’s good to know how they work. A credit card is essentially a personal line of credit which lets you buy things and pay for them later. As a card holder, you’ll be given a credit limit and (potentially) charged interest on the money the bank lends you. At the end of each billing period, the bank will send you a statement which shows your outstanding balance and the minimum amount you need to pay back. If you don’t pay back the full balance amount, the bank will begin charging you interest.

How does ANZ increase my credit card limit?

If you’re the primary cardholder on an ANZ credit card, you can increase your credit limit by logging into your credit card account and choosing the “Increase your credit limit” option. You can also submit an ANZ credit card limit increase application form by visiting any ANZ branch or by mail or fax. When completing the form, it's important to remember to specify how much you want the limit increased. You can estimate this by first calculating the amount of credit card debt you can afford to repay based on your income and expenses, and then declaring that in your application. 

Irrespective of whether you’re completing your ANZ credit card limit increase application online or in print, you’ll need to provide updated employment information, income, and expenses, which the company will have to verify. You'll also need to authorise ANZ’s access to your credit history, as your current credit score and recent credit history tell the company about your financial responsibility, and whether or not you'll be able to repay the additional debt you’re applying for. 

In some cases, ANZ may ask you for additional information, or the agent processing the application may reach out to you after your application is received. After verifying your credit score as well as your personal and financial information, however, ANZ may approve a credit card limit increase proportionate to your repaying ability, though it may not be the same as the increase you requested.

Can I get a credit card on part-time/casual work?

Yes, as credit card providers look at your annual income amount as well as your occupation. Minimum income requirements tend to be between $30,000 – $40,000 for standard and rewards credit cards, however low income credit cards can have minimum income requirements as low as $15,000 per year.

How to get rid of credit card debt

  1. Calculate your debt. Credit card calculators make it easy to determine the repayments required to chip away at your debt in the shortest timeframe possible for your budget.
  2. Repayment plans. Take some time to formulate a credit repayment plan. Consider increasing your income, scaling back your lifestyle or refinancing.
  3. Talk to your credit provider. If you’re still struggling with your debt, give your credit provider a call. You may be able to come to a new arrangement.

How to get money from a credit card

You can get money from a credit card, but generally it will cost you.

Withdrawing money from a credit card is called a cash advance, as it operates more as a loan than a simple cash withdrawal. Because it is a loan, you may be charged interest on your cash advance as soon as you make the withdrawal. Interest rates are also usually much higher for cash advances than standard credit card purchases.

In addition to the interest rate, you may also be charged a cash advance fee. This could be a flat rate, or a percentage of your total cash advance. If you are considering a cash advance, make sure to add up how much it will cost you before committing.

How long does it take to get a credit card?

There are a few stages you need to go through to get a credit card; each one takes a different length of time.

Applying for the card online, over the phone or in person is the fastest step. This usually takes around 15 minutes, provided you have all of your documents handy.

After submitting your application, it usually takes between one to 10 business days for the lender to assess your eligibility. Some lenders offer instant approval, although you will need to send supporting documents before it is official.

Once your application has been approved, expect to wait between one to 14 days to receive your card in the mail. Keep in mind that delays can happen during busy periods, such as if the lender has launched a special deal.

How to get cash with just a credit card number

Banks and merchants usually will not allow you to access cash without a physical card, because doing so would open up opportunities for fraudulent activities. Even most non-cash credit card transactions (such as shopping online) require you to know the expiry date and CVV on your credit card in addition to the card number.

However, some banks offer cardless cash for transaction accounts. Using a secure app installed on your mobile phone, you can log onto an ATM and withdraw the money you need. This could be a practical and secure solution if you don’t have a card and need cash.

Is instant approval possible for credit cards?

Instant approval may be possible – but please note that the term may be misleading. “Instant” approval tends to mean that when you apply online the lender will let you know the likeliness of your eligibility for a credit card within 60 seconds of receiving your application.

Are credit checks mandatory?

In Australia it is impossible to get a credit card without the provider performing a credit check first. This is for your benefit, as it helps to prevent you from falling into avoidable debt.

What is the lowest monthly repayment on my credit card?

As a rule of thumb, this tends to be around 2-3 per cent of the outstanding balance. You can choose how much you want to repay each billing period as long as it is higher than this minimum required amount.

How do you apply for a credit card?

You can apply for a credit card online, over the phone or in person at the bank. Once you’ve compared the current credit card offers, the application process is quick and easy. Before you get your application started, you’ll need to gather your personal information like proof of ID, payslips and bank statements, proof of employment and details of your income, assets and liabilities. To be eligible for a credit card, you’ll need to be an Australian citizen over 18 and earn a minimum of $15,000 each year. Once you’ve applied for a credit card, you should get a response fairly instantly. If your credit card application has been approved, you should receive a welcome pack with your new credit card within 10-15 days.