When a lender is deciding whether to approve your loan application, your credit score is probably the biggest factor.
In fact, if your credit score is below the lender’s cut off, it could be an immediate
This is why improving your credit score is important.
A good credit score can also mean a lower interest rate and wiggle room to
In this guide I’ll explain the factors that determine your credit score.
Plus what you can do to improve it.
To understand the best ways to improve your credit score, you need to know what actually impacts it.
It’s calculated based on various bits of information in your
Some of the information is seen as positive (increases your credit score).
And some is negative (causing your score to drop).
Here are the main factors:
Now, let’s take a look at some steps you can take to make sure your credit report and score contain more positives than negatives.
If you’re looking to improve your credit score because you have no information in your credit report, you’ll need a slightly
different approach. I’ve covered this further down the page.
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.
Knowing what negative factors are in your report means you can start to do something about them.
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.
Contact the credit provider to request that the listing be removed or corrected.
If the credit provider refuses, you can request to have the listing removed by the credit reporting agency.
Paying off any defaults listed on your credit report will likely also improve your score.
more seriouslyby lenders.
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.
But you need to be very careful with these, and ideally get some advice first…
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:
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.
This will take time, but simply making your loan and credit card repayments on time, every time will improve your credit score.
Australia’s system of comprehensive credit reporting means some positive information like making credit card and loan repayments
consistently is captured on your credit report.
(Non-financial payments, like utility bills, are only recorded if you have a default.)
Getting into a routine of keeping on top of your finances will likely make a difference to your credit score slowly but surely.
It will help you manage your debt, keep up with repayments and
importantly avoid any future issues that could set you back.
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, according to credit reporting company Equifax.
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.
five yearsafter it begins - whichever is longer.
five yearsin most cases.
If your credit score is low because you have no credit history, the main thing you can do is establish a credit record.
This happens for most of us
naturally over time.
But you may be able to make a start by simply having some utility accounts open in your name.
use 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.
This depends but often the fastest way to have an impact is to simply check your credit report and have any incorrect listings fixed. Lowering credit limits on credit cards may also have a relatively quick impact.
Creditors report to credit agencies periodically (usually monthly), so don’t panic if your score isn’t updated immediately. The same goes for disputing inaccuracies on your credit report with a credit agency.
But if your credit score still hasn’t been updated after 30 days, you might want to raise the issue with the credit reporting agency to ensure there aren’t any other issues holding you back.
Probably the easiest way to keep track of how your credit score is doing is to register for free credit score monitoring. That way you'll be notified whenever your credit score is updated and if anything changes.