How to repair your credit score



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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

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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!

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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.

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What happens if I have a bad credit score?

If you have a bad credit score, you might encounter two main problems. First, the lower your credit score, the more likely you are to be rejected when you apply for a loan or any other credit product. Second, if your application is accepted, the less likely you are to qualify for the lowest interest rates.

^Words such as "top", "best", "cheapest" or "lowest" are not a recommendation or rating of products. This page compares a range of products from selected providers and not all products or providers are included in the comparison. There is no such thing as a 'one- size-fits-all' financial product. The best loan, credit card, superannuation account or bank account for you might not be the best choice for someone else. Before selecting any financial product you should read the fine print carefully, including the product disclosure statement, fact sheet or terms and conditions document and obtain professional financial advice on whether a product is right for you and your finances.

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