How To Fix Your Credit Rating
It may not happen overnight, but little by little you might find your once stellar credit score dropping as life happens. Making a late payment by accident (or because you had to) or putting too much on your credit card might seem like temporary problems, but if your credit turns sour, it can impair your future financial success.
So if you recently discovered your credit score isn’t quite where you’d like it to be, then you should read on for our top 5 tips on how to fix your credit rating. From learning how to manage your money to auto-paying your bills and using a small personal loan to consolidate your debts, these are the best ways to fix your credit score in Australia.
Overview
- What is a bad credit rating?
- How do you get a bad credit rating?
- Why is a good credit rating important?
- How long does bad credit last?
- 5 tips on how to fix your credit rating
What Is A Bad Credit Rating?
In Australia, there are three major credit reporting bodies and there are slight differences in what they consider a bad or low credit rating. These are:
Experian, for example, considers a score of 0 to 549 (out of 1,000) to be below average. Whereas Equifax states that a score of 0-505 (out of 1,200) to be below average. It’s best that you check your score with a credit reporting body and compare it against their scoring system.
How Do You Get A Bad Credit Rating?
Missed repayments, debt agreements, bankruptcy and loan defaults can all negatively impact your credit rating.
Why Is A Good Credit Rating Important?
Monitoring your credit score and making sure no blemishes end up on your credit report is an important part of “adulting”. It’s also one of the factors that banks or lenders consider when determining whether to accept your loan application or how much they’re willing to lend.
So, a good credit rating is important if you’re looking into buying a car (if you need a loan for it) or buying your first house.
How Long Does Bad Credit Last In Australia?
According to Money Smart, a default stays on your account for five to seven years depending on the severity of the credit infringement. If you pay the debt off, the default will still appear on your credit, even though it will show up as paid off.
Now we know why a good credit score is important, keep reading to learn how to fix your credit rating if you have a low score.
How to Fix Your Bad Credit Rating: 5 Tips
1. Check Your Credit Report Carefully
Sometimes when you review your credit report, you’ll find there is a mistake that is dragging your score down. It’s important to get those fixed quickly and properly. So when you obtain your report, make sure to go over it with a fine tooth comb to ensure that everything is accurate. Look for errors in your personal information, mistaken defaults, old defaults or incorrect details in your credit history.
If you find an issue in the report, then you need to notify the credit reporting agency in writing. The agency then will check the information you provided and will fix your report if the information and supporting documentation provide the proof necessary. Keep track of your report and once a mistake is fixed, then you should see a jump in your credit score.
2. Autopay Your Bills
Always, always pay your bills on time. Even if you have to work out a payment plan with the electric company or only pay part of your credit card bill, it’s better to pay on time than have an ‘over 30 days’ note on your credit report.
Automating your bill payments is the easiest way to ensure you aren’t missing those due dates. Here are a few ways you can automate your bills:
- Split monthly bills into weekly amounts and pay them off in instalments via Bpay. This is called bill smoothing and is super useful to avoid bill shock.
- Change the due date of your bills to the day you get paid.
- Set up an average billing arrangement with your utilities. This will make your bill the same, smaller, amount every month.
- Put as many bills as you can on autopay (especially if you happen to be forgetful or just find juggling all the due dates is tough). That way it comes out of your account on the exact day it’s supposed to and is never late. You just need to remember this and make sure there is plenty of money in your account to make the payment.
And if you’re having problems making a payment, call the lender or company in question. You can appeal for a financial hardship extension or work out a different repayment plan.
3. Avoid Negative Listings
When it comes to learning how to fix your credit rating, take note of the ‘paying bills on time’ tip here. If you’re over 30 days late on a payment, it will show up on your credit report, and it will stay there for five years. That hurts your credit rating for a long time!
But when it comes to late payments, there’s more to it than just avoiding negative marks — you want to avoid writs, judgments, bankruptcies and clearouts. These can stay on your report for up to seven years!
So even if you find you have been billed for something you didn’t buy, it’s better to pay for it before you finish disputing it and then have it reimbursed. You don’t want to risk a mark on your credit report that you later have to dispute as well!
4. Don’t Have Too Many Hard Credit Enquiries
If you’re trying to figure out how to fix your credit rating, don’t go out applying for a bunch of small loans. This includes if you are just looking for the best deal. Always be sure of what you’re doing when you agree to a hard credit pull.
A hard credit pull involves an enquiry of your credit report from a lender, not when you request your own report. Each hard enquiry wipes a few points off your credit rating. Also, lenders often see too many enquiries as a cry for help.
Time is an important element of this process too. So if it’s been a few years since you’ve had an enquiry, it looks better than if you have had several recently. That’s why, if you’ve been turned down after applying for credit, take some time before you apply elsewhere.
5. Build Up Good Credit
The best way to improve your credit score is to create a good credit history by carefully managing your money. You’ll need to do a few things to start down this path:
- Make a monthly budget that you can stick to
- Don’t miss any payments or pay late
- Don’t apply for any unnecessary forms of credit
- Monitor your money and your credit report
By paying your monthly bills on time and paying down debt, you’ll find that your credit history will improve.
If you find that it’s hard to manage debts or juggle all the bills, then it might be a good idea to look into getting a debt consolidation loan, so you only need to make one recurring payment. This way you’ll find that it’s easier to manage your monthly budget, and you’ll know when you’ll be out of debt. Both are excellent things to do when looking to improve your credit rating.
Learn how you can apply for a bad credit loan at Swoosh that’ll not only improve your credit score but will rid you of those nasty debts! So go ahead and put yourself on the road to financial freedom. Plus, if you have any other questions on how to fix your credit rating in Australia, you can speak to the friendly customer support team at Swoosh!
