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.
- 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.
- 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.
- 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.
- 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.
- 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.
- Take your credit report when you see a lender. A better score could mean you can negotiate a better interest rate.
- 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.
- 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!