How to improve your credit score
A bad credit score can significantly affect your borrowing options and financial reputation. However, just because your score is currently low doesn’t mean it has to stay that way. You can take steps to improve your credit score and secure a better financial future.
Firstly, it’s essential to understand what a credit score is and how it impacts your finances. A credit score – also referred to as a credit report, credit file, or credit rating – provides lenders with a snapshot of how responsible you are with money and credit. Negative items on your report, such as missed payments or defaults, can lower your score. This may lead to loan denials or, if approved, loans with higher interest rates, which can cost you more now and over the life of any loans or credit cards you have.
Here are six ways you can start improving your credit score.
1. Know your credit score!
You may be aware that your credit situation is not ideal, but do you understand just how serious it is? To effectively set improvement goals, it’s essential to know your starting point. To learn more about your credit report and the financing options available to you, visit: My Credit Options.
2. Set a goal
If you’re trying to get out of debt or planning a significant future purchase, such as buying a home, it’s important to set a credit score goal that aligns with your financial plans. Having a clear goal can help you overcome challenges, make necessary sacrifices, and work towards achieving the financial success you desire.
3. Fix what you can easily fix
If you discover any inaccuracies in your report, be sure to take steps to correct them. If you’ve been late on payments, create a plan to catch up on your accounts so that your report starts to reflect a more positive payment history. Keep your credit card balances low and pay them off in full, rather than just transferring the debt. This shows that you can manage credit cards responsibly, and maintaining this behaviour consistently over time will be beneficial. Additionally, be cautious about applying for and opening new forms of credit unless it is truly necessary.
4. Negotiate terms
If you’re struggling to catch up due to financial hardship, consider calling your lenders to discuss negotiating lower rates or a payment plan to get back on track.
5. Continue to check your credit report and score
Continuously monitoring your progress throughout the year will help you see the improvements in your score. Observing better results will motivate you to reach your end goal, and it will also allow you to identify and correct any inaccuracies along the way.
6. Debt management help
If your debt continues to spiral out of control despite trying various solutions, you might want to consider a debt agreement. A debt agreement is a legally binding arrangement between you and your creditors that can help reduce your overall debt, freeze interest charges, establish repayment terms that are manageable for you, and provide a viable path to becoming debt-free. While this agreement will be recorded on your credit file, it could be the necessary solution if lenders are no longer willing to extend credit to you. For more information, read: Debt Agreements – what you need to know.
Safe Debt Management has helped Australians from all walks of life recover from crippling debt. So, if your debt has become unmanageable, we’re here to help make your life better. To find out how we can help you take control of your debt, request a FREE debt assessment today — what have you got to lose, but your debt!