Since the global financial crisis, your credit rating has never been so important when borrowing money from a bank in Australia.
A financial health check of sorts, your credit rating tells potential lenders in a snapshot whether you are a risky borrower. Your past mistakes can affect your financial future – and what you can do to sharpen up your financial record.
There are a few places where you can get a copy of your credit record or credit rating for free. These include www.mycreditrating.com.au, www.dnbcreditreport.com.au and.www.mycreditfile.com.au.
Remember, Australian banks can afford to be picky – they are the ones with the money. So if you have got a bad credit, use this these ten tips to tidy up your lose money ends.
Ten ways to improve your weak credit rating include:
- Know that it is quite easy to get a bad credit rating. Anyone that has ever defaulted on a loan, taken too long to repay a debt, that interest-free loan you took out in your teens, or even not returned a video can end up with a bad credit rating.
- Thoroughly check your credit file. If you believe there is a mistake, you can dispute it. Contact the credit reporting agency to get any mistakes rectified.
- If you get no relief about disputed charges on your credit file, talk to the Financial Ombudsman Service.
- Decrease any unnecessarily large credit limits. Even if you have a $0 balance on your credit card, lenders will consider your potential debt amount – which means the credit card limit.
- If you don’t have a credit card, apply for one. As counter-intuitive as this sounds, it is not really possible to improve a bad credit rating without showing you can actually pay back credit in a timely manner and are a not a risk to the bank.
- Pay your debts on time. Use options like direct debit to make sure you don’t miss a bill.
- Show you can manage a mix of different debt types – for example a small personal loan and a credit card. Of course, do not overextend yourself.
- Do not max out the plastic. When determining a credit rating, the debt to available credit ratio is considered. If you have $5,000 credit, but $2 available, you are not looking like a winner.
- Avoid bankruptcy. As tough as your debt may seem, being an undischarged bankrupt will stay with you for seven long years, and greatly impact your financial life.
- Take charge of your financial future and get some counseling to ensure you stay debt free.