How to Improve Your Credit Rating
How to manage and improve your credit rating:
Your credit rating is used whenever you apply for a loan or credit. In most cases, it even determines how much interest you will have to pay and other fees and charges, such as lender’s insurance. Your credit rating can determine not only whether you will be successful in obtaining a loan, but how much that loan will ultimately cost.
Your credit rating is impacted by a number of potential factors, including:
- Existing debt indicates how much financial burden already exists
- Late or missing payments on current debt will indicate an inability to meet current debt obligations
- Other credit applications with other lenders show as a record on your report
- Multiple credit cards, especially when you don’t use them all
- Holding joint accounts with someone who has a poor credit rating
There are also potential for mistakes on your credit report. A lot of people don’t realise the level of access lenders have; the last time you called and spoke to someone in a contact centre, you may not have realised that your credit report was being accessed.
Unfortunately, errors on credit reports may also exist for victims of fraud. If you feel that there are mistakes on your credit report, you can apply to have them fixed either with the lender or the credit reporting agency.
The first step to improving your credit rating is to understand what your credit report looks like. We recommend obtaining a credit report and making sure that there are no current issues we can assist you with this at no cost to you. Any potential lender will be doing this, so it is good for you to be able to address any issues or concerns from a base of knowledge.
Here are some short-term strategies to improve your credit rating:
- Stop applying for credit
Most people don’t realise that all enquiries leave a record on their credit report. Sort out any credit issues first, improve your overall credit rating, and then apply for credit.
- Cancel unused credit cards
Your total available financial limits are calculated on all available credit, not just the amount of debt that you presently have or use. Cancel any unused credit cards and tidy up old accounts before applying for new credit.
- Consider deconsolidating credit
If your spouse has bad credit, consider deconsolidating accounts. Try to apply for loans only in your name, and not put in joint applications, as this will decrease the chance of success.
Long term strategies for a better credit rating:
- Consolidate debts
A lender might be able to help you by consolidating debts to make them more manageable and cost you less.
- Make regular payments
Once your debts are consolidated, this should become even easier. Maintaining good behaviour when it comes to loan repayments demonstrates to other lenders that you are not high risk.
- Keep lenders informed
If you are going to be late with instalments make sure you contact your lender and let them know. If you change address or even your phone number make sure you update the lender. Like any relationship communication is the key!
- Give it time
If you are following these steps, keep it up. If you started with a low credit rating then over time, your credit rating will improve.
All Nation Finance are your local finance brokers in Perth. If you want more information on how to prepare your credit report, contact All Nation Finance.
Contact Alan on 0424 185 442 or Gayle on 0411 49 800.