8 Tips for a clear credit score

From March 2014 this year, Australian consumers* will have to be aware of and contend with a new level of financial scrutiny - called Comprehensive Credit Reporting. Its a big deal.

  1. Your payment history will be monitored. Don't be more than 5 days late for ANY payments (energy bills, credit cards, home loans - anything) - it will go down as an 'Amber light' on your credit file. It will move your credit score lower because your payment history makes up as much as 35% of your credit score! Key tip: Watch your bills religiously, and set up a direct debit for key bills where you can.
     
  2. Your Credit Limits will be known: Banks and lenders will register your lending with the credit agencies - so all limits will be known when you go for credit from march 2014. Tip: close any old lines of credit you don't want. 
     
  3. Obtain your latest credit report. The ACRA estimates 80% of Aussies have not ever checked their Credit Report. Get a copy for free. Now. You are entitled to a free credit report each year.
     
  4. Pay for a monitoring service (Veda, approx. $120 per annum) that will give you monthly updates and help in protecting you from ID Fraud. You'll be sent alerts each time your credit score changes.
     
  5. Your Score will be updated more frequently. All of the monitoring on your payment history means your credit score will be ticking along, scoring more frequently. Overall, scores range from 0-1000, with 1000 being perfect. A score of 619 is average. Try and get above 750 if at all possible.
     
  6. Take your credit report when you see a lender. A better score could mean you can negotiate a better interest rate.
     
  7. Do not shop around with multiple applications (i.e. go to NAB, Commonwealth and all the others just to apply). Research and apply ONCE. Tip: Use a broker - they will be able to do research for you in one go across 30-40 lenders AND give you the best advice and service along the way. You save time, and any impact on your credit report.
     
  8. Never default - always work payments out if you are in financial stress. Your defaults are listed on your credit file FOR 5 YEARS. All lenders worth their salt will be required by government regulation to allow borrowers revised payment terms if they are under financial hardship. Tip: your financial adviser/broker, a consumer advocate, or the Financial Ombudsman or Credit Ombudsman service will be able to help where a hardship request has fallen on deaf ears. Tip 2: Take your name off the accounts of any utilities of any shared homes you have moved out of!