A credit score is a number, based on an analysis of a person’s credit file, to represent the creditworthiness of an individual.
It affects whether you can borrow, how much you can borrow and importantly how much interest you pay, so it is worth putting some work into.
When we say ‘work’, yes we mean preparation!
It is always a good idea that if you have the time to prepare and plan for your lending.
Credit Scores are built according to the following:
Your personal details such as your age, location
The type of credit providers you have used like bank or utility company
The amount of credit you have borrowed
The number of credit applications and enquiries you have made
Any unpaid or overdue loans or credit
Any debt agreements or personal insolvency agreements relating to bankruptcy
If you are not sure what your credit score is then you can actually check it online. You can get also get an analysis of that score to see where you can improve.
Here are 5 tips that may help you to get a better credit score prepared by one of NEXT Asset Finance’s credit professionals.
1 – Bills
Paying your bills on time. Seems obvious but we are only human and even a bill as low as $150 can be recorded against you if paid late. Many utilities and telco suppliers offer reminder services, so it is a good idea to take advantage of this usually free service.
2 – Credit Applications
Whether approved, or accepted, or neither, a credit application of any type will show up on your credit score. After having said that, and telling you to be careful of what you apply for, it can actually be good for you applying to consolidate credit. With credit applications and advice on applying for credit or consolidating debt, it is always good to ask the opinion of a recommended credit advisor or broker. Yes they may get a fee but they can also save you a great deal of grief and frustration.
3 – Pay down Debt
The lower your debt exposure the better your score. Having had good credit is great for your score but the new lender will look at serviceability and with the enforcement of good lending practices these days (which is a good thing), lenders will be making sure you stay out of trouble by not lending if they think you are close to your serviceability limit.
4 – Credit Analysis
When you do get your credit score look at it in detail to make sure it is correct. Look for incorrect debt listings and question them if you think they are not correct. In particular look for fraudulent activity. It is amazing how often identity theft goes unnoticed by the victims. Not checking first and allowing the lender to find it before you do, right or wrong, does not go well for you and raises alarms with most lenders. Paid debts can be removed from your credit listing, so it is a good idea to do that before you start.
5 – Hold on to credit cards
A surprising tip I am sure but actually managing credit cards well is seen as a plus. Good to lower your limits but providing evidence that you can manage credit responsibly by making the monthly payment, especially if it is in full each month can add to your financial credibility.
Mostly all good common sense but amazing how many people do not manage it well. Always a good idea to take on a professional to assist you and even a lot of good accountants these days will offer an advice and management service.
For more advice and a financial health check you can contact NEXT Finance on 1300 63 7283
