Tips for improving your credit rating?

[BLTN]

With the threads around lately about your credit rating, it's got me thinking as to what you can do to improve it.

I should have an excellent credit score as I've never missed a single payment on anything and I am very organised with all my payments - but it has occurred to me that this might not be enough.

I am contemplating signing up to Veda to get monthly credit score updates - it seems like a fairly low price to pay to potentially give you some bargaining power with the banks, as well as getting more transparency as to what is driving your score up or down.

For example, does applying for credit cards hurt your credit rating? Or getting pre approval for loans? Or refinancing to a different lender? etc etc

 

[Peter_Tersteeg]

Additional credit cards, pre-approvals, etc, all create entries in your credit file which will all negatively affect your credit score.

To improve your credit score, you can do things like:
* Reduce or close credit cards.
* Pay off debt (might help).
* Don't apply for more debt (includes refinancing).
* Don't move residence.
* Don't change jobs.
* Get a job that's considered to be more stable (whatever that is).
* Don't be a company director.
* Pay all bills on time.

Credit scores are a black art and the target is constantly moving. There's no easy answer. A 'good' credit score is all most people can ever realistically expect and is almost certainly more than enough.

 

[Aaron_C]

The credit rating number isn't that important. What's important is that it's 'not bad' i.e. with defaults. That is when the cost of credit can go up. Other than that, it's pretty immaterial and even less so if LMI is not involved.

 

[Redom]

As Aaron mentioned, it really does damage once you have defaults or other negative activity. Other than that, improving your credit rating from say 800 to 850 doesnt have much of an effect on your ability to attain credit.

A couple other aspects that spring to mind that can help improve your credit score:

1) Time. Largely out of your control, but the longer history you have, the better your score becomes.

2) The type of debt you attain is scored differently. E.g. i've applied for a few home loans recently and my score has increased. I applied for a credit card not too long ago either and my score went down. I imagine if you went to cash convertors it'll do greater damage than going to Westpac too. From my experience, tellecom debt doesnt really do that much to your score either.