Back to Knowledge Hub

3 Things You Can do Right Now to Build up Your Credit Score

Bad Credit

You’ve pulled a copy of your credit report only to find your credit score isn’t looking so good. So, how do you build up your credit score and why does a good credit score matter?

If you’re on the hunt for a personal loan, you want to make sure your finances are in good shape to increase your chances of getting your loan application approved. One of the key things a lender will look at is your credit history – and your credit score is central to this.

Your credit score reflects how well you’re managing your finances. The higher the score, the better your chances of securing a loan and it could also pave the way to a lower interest rate.

Why do I have a bad credit score to begin with?

There are many reasons why your credit score may be slipping. Often people don’t realise it’s the way they’re managing their finances that’s contributing to it. Some of the common culprits include:

  • Not paying your bills on time

  • Making too many credit application requests

  • Missing a loan repayment (if you already have one)

  • Defaulting on a loan

How to build up your credit score

The good news is if you’re sitting on the lower end of the scale, there is room for improvement. By changing up your financial habits and keeping on top of things, you can build up your credit score. Here’s three ways how.

1. Pay your bills on time

Missing the due date on the bill happens, we’re only human after all! The odd late payment isn’t going to hurt your score, but if it happens on a regular basis it will. So it’s important to keep track of all your bills and make sure you’re paying them on time.

A great thing to do is set up direct debit payments for some of your key utility bills, phone or internet bills you receive. That way you can be sure your bills will be paid on time and avoid being stung with late payment fees.

If you can stay on top of your bills, then you’ll start to see your credit score improve.

2. Manage your credit wisely

There’s nothing wrong with having debt. Being able to show lenders you can manage it responsibly is a great way to boost your credit score. But, just like paying your bills on time, it’s only good if you’re hitting those repayments.

Ideally, you want to pay your credit card in full each month, but if that’s a stretch try to at least cover more than the minimum repayment. Do this consistently and it will start to build up your credit score.

If you clear the debt on your card and decide you don’t want to use it anymore, it’s still a good idea to keep the account open. Having no negative reports against your name will help boost your credit score.

Some of the other ways you can build up your credit score include lowering your credit card limit. This will also help you control how much you spend because you don’t have as much available in the kitty.

Only apply for credit if you have to, and when you do, limit the number of applications you make. Many people aren’t aware that every time you apply for credit or a personal loan, it will show up on your credit report. And this in turn will have a negative impact on your credit score.

3. Check the facts on your credit report

It may seem like an odd thing to do, but cross-checking the details in your credit report could save your credit score. Having incorrect information on your credit report means your score could be taking a hit in the wrong direction.

Some things to look out for include:

  • Are your personal details correct?

  • Is your debt amount correct?

  • Are there any duplications

  • Debt you didn’t take out

  • Repayments not recorded

If you find any errors, contact the relevant Australian credit bureaus – Equifax, Experian or Illion.

What you can’t change on your credit report

There are some things you won’t be able to shake off from your credit report. This includes payments for bills, credit cards or loans you’ve made in the last two years (regardless of if you’ve paid them on time or not).

Any overdue payments of $150 or more will remain on your credit report for five years – even after you’ve paid the amount. And any applications you’ve made for credit cards, home loans and personal loans will also stay on your report for five years.

Improving your borrowing power with Comprehensive Credit Reporting

Thanks to Comprehensive Credit Reporting (CCR), also known as positive reporting, lenders now get a complete and fair picture of your credit history. CCR is how your credit information is reported to Australian credit bureaus.

Previously, financial institutions only used to provide negative credit information about you. Now, credit agencies receive more information such as the type of credit products you hold and your repayment history (for example if you regularly pay your bills on time).

It became compulsory for the Big 4 Banks in 2018, and Fair Go Finance was one of the first small loan lenders to adopt this reporting in 2019. We’ve noticed positive reporting has helped to build up credit scores for our customers and it can only mean good things for you!