It’s important to have a good credit rating when you apply for a loan or any other type of credit (including credit cards, mobile phone/internet plans and utility services like electricity or gas).
If you have a good credit score, you can usually get finance approved on the best available terms and conditions.
What is a credit rating?
A credit rating (also called a credit score) gives a lender an idea of the risk of lending you money. Several factors influence your credit rating, including:
- your credit history.
In other words, whether you’ve made your scheduled repayments on time for previous credit you’ve received over the last five years. Lenders record this information with credit reporting agencies and check it whenever you apply for finance.
- the number of credit applications you’ve made over the past five years.
If you’ve had a number of unsuccessful applications, it means that lenders generally perceive you as too great a risk.
- whether you’re on the electoral roll and how often you change your address.
Lenders prefer stability and transparency with your contact details.
How can I find out my credit score?
You have a legal right to access your credit score through reporting agencies like Equifax. You also have the right to have any incorrect credit history information about you promptly corrected, as it affects your chances of any credit approval.
Credit scores usually range from 0 to 1200, depending on the credit reporting agency. The higher the score, the better. Any credit score less than 500 is generally a cause for serious lender concern. If your credit score is that low and you apply for finance, lenders will usually either:
- reject your application, or
- charge you a higher interest rate to compensate them for the risk of approving your application.
Ways to improve your credit score
The simplest way to improve your credit score is to make all of your scheduled credit repayments on time.
The two major things you want to avoid are late or missed credit repayments. Both negatively affect your credit score. You can take simple steps to avoid placing yourself in this position. For example, by keeping your creditors informed of any changes to your:
- contact details (i.e. your physical or email addresses and phone numbers), so you don’t miss any important payment due notices from your credit provider;
- bank account details, so any direct debit repayments of your credit aren’t missed.
If you do find yourself struggling to make any of your repayments, talk to your credit provider to see if you can come up with an alternative repayment plan before you start missing any payments. It’s in their best interest as well as yours for you to repay the credit they’ve provided to you. If you do agree on an alternative repayment arrangement with your provider, make sure it is in writing and that you stick to it.
If you have multiple debts, consider consolidating them into a single credit arrangement with the lowest possible interest rate before you start falling behind with any of your repayments. However, if you’ve actually missed repayments on any credit provided to you, rectify the situation as soon as possible. Don’t bother applying for additional credit if you have overdue debts.
How we can help
At Wisebuy Investment Group in Newcastle, our experienced and licensed brokers can help you with applications for residential, personal and commercial loans, as well as asset and equipment finance.
Contact us today for an obligation-free chat! We’ll take the time to understand your individual situation before providing you with appropriate advice. Our focus will be on finding the right loan for your needs from over 60 Australian lenders.