Reaching and maintaining a good credit score is important. It can make it easier to apply for big loans as banks are more inclined to deny applications for a loan if your credit rating is poor. A good credit score will ensure you can obtain that loan needed for your dream house or your new car. For smaller amounts, such as credit cards or personal loans, a good credit rating can result in better interest rates, saving you significant money in the process.

A good credit score can even help you secure lower payments on homeowner’s, health and life insurance. In some cases, it can even assist you in landing a new job as employers may conduct a credit check in the hiring process and consider only those candidates with a good credit score.

So how can you get – and retain – a good credit score?

Here are a number of initiatives that you can do to make sure your credit score is healthy.

1. Have active credit accounts

This might sound odd – why would a lender prefer that you have debt? The reality is that lenders like to see a history of payments of debts. Zero credit history is actually to your detriment, as the lender will assume that you’re a high risk as you’ve got no way to prove you can pay debt on time.

The good news is there’s a lot of small things you can do that can help you create a credit account. Having mobile phone or Internet plans in your name, for example, are considered in your credit rating. Credit cards are as well, and it’s good to have one or two of those open, but without too much debt on them. It’s important that they’re all registered to your name and address, and if you move, you must immediately change all of these details over. That way they can be associated with you by the credit agency.

2. Pay your bills on time

Don’t worry if you are a week or two late with an unpaid bill, generally, it won’t show up on your credit report. What actually happens is this: an overdue payment of in excess of $150 that has been overdue for over 60 days will appear on your credit report. It will also stay on your credit report for five years. These are black marks, and each one of them will hit your credit rating hard.

Make sure you track all of your bills and debts, and set up calendar reminders if necessary so you don’t miss payments. Many of the places where you can take on debt will allow you to set up automatic payments – and that’s another good idea if you’re inclined to be forgetful.

3. Whatever you do, don’t run from your debts

If you move house and don’t provide the credit provider with a new way of contacting you, you can, after a period of six months in which the credit provider has taken reasonable steps to contact you, have a clearout recorded on your credit file. These remain on your credit file for seven years, though if they are then paid they will revert back to a default instead. Needless to say, credit providers take a very dim view of anyone with a serious credit infringement like a clearout on their record.

4. Don’t apply for credit too often

Each time you put in an application for credit, the financial institution makes a “hard” enquiry on your credit rating. In other words, the application will from then on appear on your credit report. This has two effects:

• Firstly, each “hard” enquiry will reduce your credit score by a few points.
• Secondly, if there are too many enquiries bunched together, the lender will likely assume that you’re in urgent need of credit, and therefore classify you as being at high risk of financial distress.

5. Remember to pay off some debts too

While it’s good to have some ongoing credit accounts to show that you’re able manage debt, also reducing some debts to zero is a good way of demonstrating that you’re able to pay debts off completely. It’s a good idea to pay over the minimum repayments for a debt you’re paying off, too. Not only will you save significantly in overall interest charges by paying a debt off more quickly, but you’ll also demonstrate to an assessor looking at your credit file that you’re able to comfortably manage your finances.

6. Regularly check your credit report

Finally, it’s also a really good idea to keep an eye on your credit report and check it as often as possible. You’re able to request free checks of credit reports on a regular basis, and start the process of getting a credit file adjusted if there’s a mistake showing on your report (which is not unheard of). More importantly, it’s also important to keep a close eye out for fraud. With more and more identities being stolen by the day, and as hackers find new ways to pull information about you off the Internet, you can end up with a ruined credit report, filled with financial black marks, if it should happen to you.

Improve your credit score today

With the number of advantages of having a good credit score and easy ways to improve it, there’s no reason why you can’t start today. Suffering from a bad credit rating but unsure why? Learn more about the major factors that affect your credit rating. For more information on how to check and read your credit report, and how to take out loans, contact our team at SRG finance who can walk you through everything you need to know.