Top Five Tips to Maintaining a Good Credit Score
Your credit score is how you handle credit and takes into account your previous actions not just your present situation. Your credit score is determined by analysing the data contained in your credit file.
The range of data on your credit file can include:
- your default history, including overdue debts such as mortgage repayment defaults, or credit card payment defaults
- the number of credit enquiries on file (made by lenders/credit providers)
- the number of credit enquiries you have made in the past 12 months
- your ‘credit shopping’ pattern; that is, how many lenders you have requested credit from.
Credit infringements remain on your credit report for up to seven years so the best way to improve your score is to manage it responsibly over time – consistency is key! Below are five tips to maintaining a good credit history and to ensure that your credit rating is never an issue when applying for credit.
- Know your credit card balances
Just owning a credit card will improve your score as it shows you have more available credit, however, this is only if you handle it responsibly. How much revolving credit you have versus how much you are actually using has a major impact on your credit rating even if you pay your balances in full every month. Your credit score considers your monthly balances on your credit card so if possible, it would be more beneficial to make payments twice a month to keep your revolving credit as high as possible.
- Pay your bills on time
It can be hard to keep track of all your finances and bills needing to be paid however forgetting to pay bills may do lots of damage to your credit score. Usually, after 30 days of no payment, the credit bureau is notified and this then affects your score. It may be something as simple as a phone bill or even an overdue library book which may then be referred to debt collectors. If you have a tendency to forget about your bills, set these up to be automatically drawn from your account to ensure you never miss a payment.
- Change your address
A common mistake made is forgetting to change your address with your credit providers when moving house which can lead to debt collectors after you and a bill which continues to increase. This can get quite serious and can result in your credit score decreasing and will be on your report for the next seven years.
- Do your homework before making a credit application
Be aware that each time a lender reviews your credit file a credit enquiry is left on your record to show that you made an application with them. This does not look good to lenders as you are seen as a high-risk borrower because they then assume that you have been declined by these lenders and are then suspicious as to why. The fewer enquiries on your report, the better!
- Dispute errors
Mistakes do happen so if you think there is a default on your account that is an error, don’t hesitate to dispute this. Write a formal letter to your credit reporting company and attach a copy of your report with the errors highlighted. State the facts and explain in detail why you are disputing the information and request that it be removed or corrected. You never know until you try and getting it removed with greatly improve your score.
To receive a copy of your credit report or to talk to someone in more detail contact Veda Australian.