You've probably never seen your credit report, but the rating which it is assigned can hugely effect your life. A bad credit rating could prevent you from getting financing for anything from a new house or car to a strong credit card, or see you find only deals which offer incredibly high interest rates.
Australia's negative credit reporting system can make it hard to improve your score, but there are still a few ways you can help yourself out.
Correct Your Debt to Credit Ratio
Let's say you're earning a good wage, and that you've never missed a payment on your $5,000 limit card. That's great—but you might still look like a credit risk if that card is kept right up close to the limit if you only pay off the lowest possible amount each month.
Unfortunately, this can make it appear as if you're still using the card to live beyond your means. If you consistently reach the end of the month at $5,000, then simply pay back $2,000 and start again, it can make it appear as if you simply can't spare the other $3,000 each month to totally clear the dept. Instead of letting this happen, keep the ratio between your debt and your credit limit as low as possible.
Keeping old current accounts open for as long as possible improves the length of your credit history, so try to avoid changing unless you truly need to. Additionally, only apply for credit if you actually need it.
It's too easy to pick up credit cards everywhere now, even at retailers. These are usually offered with a tempting incentive; they might save you $25 on a larger purchase, or allow you to gain more loyalty points. However, constantly applying for more credit is liable to put off potential lenders. They may fear that you are attempted to live on borrowed money.
Get in (Some) Debt
If you want someone to loan you an appreciable amount of money, you'll need to have been in debt before. Crazy, but true. You can't be judged on something you've never done before, and your risk level can't properly be assessed without any borrowing history. Organisations might find no credit rating more appealing that a negative one, but it's far from ideal.
If you don't have any credit history, try to secure a credit card with a low spending limit. As long as you stay on top of your payments, this will demonstrate to potential lenders that you're able to manage your own finances and pay money back on time.
Rebuilding your credit rating isn't something that will happen overnight, but the sooner you start taking control of your finances the sooner they'll improve. Consult resources like Maddern Financial Advisers to create a plan to maintain a better credit score or gradually get out of debt.Share