Improving your credit score is one of the most effective ways to unlock better interest rates and improve your chances of being approved for a loan, credit card, or other finance product.
In this guide, we’ll explain the factors that determine your credit score as well as some effective ways to improve your credit score responsibly.
8 ways to improve your credit score
1. Check your credit report
The first step toward fixing your credit score is knowing what's in your report. Check your credit score now and view your credit report for free. Importantly, checking it won’t affect your credit score.
You can request a free copy of your credit report from the following credit reporting agencies:
2. Fix any incorrect information
Go through your credit report and check for any incorrect items.
These could be double listings of debts, or debts that aren’t yours. They could either be mistakes, or signs that you’re a victim of identity theft.
3. Pay off any defaults
If you have defaults listed on your credit report, paying them off is one the most important steps you can take. Clearing your debts shows lenders that you’ve taken responsibility over your finances.
Prioritise financial defaults first, such as overdue loan or credit card payments, as these are taken most seriously. Then focus on non-financial defaults, like unpaid utilities or subscriptions, to prevent further negative marks.
4. Avoid applying for unnecessary credit
A declined application now will almost certainly make your credit score worse. Even if you’re approved for a bad credit loan, taking on more credit (at a higher interest rate) could make managing your finances difficult.
Potential exceptions to this step are loans for debt consolidation and balance transfer credit cards, which are designed to make it easier and less expensive paying down debt.
But you still need to be very careful with these products, and ideally get some advice first…
5. Get advice
Getting advice from an expert could help you make decisions on specifics (like whether consolidating debt is a good idea for you) but also your broader finances.
You have a couple of options here:
Speak with your credit provider: They may be able to help with options like a repayment plan.
Financial counselling: You can call the National Debt Helpline on 1800 007 007. They offer free, independent financial counselling that could help you create a budget and even negotiate your debt.
6. Lower your credit limits
The credit limits on your credit cards (not the balances) are listed on your credit report. Lowering your limits could help to improve your credit score.
It can also help with your overall capacity to borrow in the future, as lenders assess new credit applications based partly on your credit card limits.
7. Make your credit repayments on time
It may sound simple, but consistently paying your loans and credit cards on time is one of the most effective ways to improve your credit score. Under Australia’s comprehensive credit reporting system, positive behaviours (like making repayments on time) are recorded on your credit report and can help improve your score over time.
It’s also worth noting that non-financial bills, such as utilities and phone plans, only appear on your report if they become a default.
Recent consumer research from Money.com.au found that 15% of Australians forget to pay their credit card balance each week, while 24% admit to procrastinating when it comes to paying bills, showing just how easy it is to fall behind despite the best intentions.
Setting up automatic payments or reminders can be one of the easiest ways to stay on track and protect your credit score.
8. Build good financial habits
Good financial habits play a big role in improving your credit score. Getting into a consistent routine with your money helps you stay on top of repayments, manage your debt, and avoid issues like missed payments.
Simple habits such as creating a budget, reviewing your bills., keeping track of due dates, and maintaining an emergency buffer can go a long way in building a positive credit history over time
Simple steps to help build stronger financial habits
- Set up automatic repayments through your online banking so your bills and loans are always paid on time
- Create a budget to plan ahead and avoid any nasty surprises
- Build a small emergency fund in a savings account to cover unexpected expenses -Review your spending regularly to stay aware of where your money is going
How long will it take for my credit score to improve?
How long it takes to improve your credit score will depend on what’s causing the issue. Plus what actions you take to make improvements. If you're fixing up minor details like a lender not updating a closed credit account, the improvement will be fast.
But more serious issues, like falling victim to identity theft, could take longer to fix.
Other negative items on your credit report will automatically be removed over time (you generally can't speed this up).
Again, how long it takes for your credit score to improve depends on what the issue is.
| Issue impacting credit score | Resolution time |
|---|---|
Payment Defaults | Removed from your credit report after five years |
Bankruptcies | Removed from your credit report either two years from the date your bankruptcy finishes or five years after it begins - whichever is longer. |
Debt agreements | Removed after five years in most cases. |
Court judgements | Removed after five years |
Credit enquiries | Removed after five years |
Late payments | Removed after two years |
How to improve your credit score if you have no credit history
If your credit score is low simply because you don’t have much credit history, the first step is to start building a credit record. This usually happens naturally over time, but you can accelerate the process by having some accounts (such as phone or energy plans) in your name.
Some people apply for a credit card as a starting point to establish their credit record. If you plan on doing that, be sure to manage the debt carefully. And ideally look for a card with low fees and a low interest rate.
It’s also important to avoid applying for multiple products at once as several new applications in a short period of time can negatively impact your credit score.
