Checked out your score and weren't happy with what you saw? Don't worry — the great thing about a score is that you can raise it by changing what you do with your money. In this blog, we'll show you exactly how to improve your credit score, so it's the best it can be.
Where to start.
You might have heard that poor credit management can make your score drop — but the good thing is that it goes both ways. Make the right choices and, even if your score's not looking great now, there are ways you can improve those numbers.
What is credit again?
Credit is basically when you get a good or service in advance of paying for it, with the understanding that you'll pay for it later.
Loans and credit cards are typical examples, but even your utilities (like your electricity and internet) affect your credit score. After all, you get your power bill once the month has ended, which means you're paying backward. Banks and other lenders will want to know about it if you don't pay your bills for things you've used.
In a nutshell.
When you apply for any credit, whether a loan for a new car, a phone plan, or even setting up the utilities, your credit provider's going to run a credit check on you. This is to see if you're likely to pay back what you owe on time.
You can understand why they would. If a friend of a friend asked to borrow your car keys, surely you check with your friend first to see if their friend is likely to return the keys.
Lenders want that same peace of mind. Running a credit check on you is their way of working out whether you're a good borrower — are you likely to sort those repayments, or are you unlikely to be able to repay what you owe?
So, the lower your credit score, the riskier a borrower you look - which means you'll have a more challenging time getting a 'yes' to those loans.
Luckily, there are ways to improve a credit score. If missing repayments can hurt your score, getting them under control can boost it, improving your chances of getting a good deal on loan.
How do I go about doing that?
You can always check in with Yonda to see your current credit score — we're all about helping Kiwis manage their money better. Below are a few rips to help your credit score climb:
Sort those debts.
This should be step number one. A record of regular repayments will show that you're focused on paying your loans back on time.
Know your score.
Knowing where your credit score stands can help you put a plan in place to start fixing it. Plus, you need to make sure your information is accurate.
Pay your bills on time.
It isn't just bank loans and credit cards that affect your credit score. Phone, power, and water bills count, too, so make sure that you always pay them in full and on time.
Sometimes a mistake can appear on your credit history, which will drag your score down. If that's the case, it's time to act quickly and get your credit information sorted before it affects any financial decisions you make.
So, if you see any errors on your credit history that you're sure aren't related to your activity, make sure you report them to a credit reporting agency.
Slow down on credit applications.
Every time you apply for credit, your credit provider will run a check on your credit score — and each review gets added to your report.
Lots of credit enquiries can hurt your score. It makes you as if you're unable to get the funds elsewhere, which is why it drops your score — because it's an indicator of your 'attitude' towards credit lending.
If banks or lenders see you applying for many credit amounts, they may not want to lend to you, as you pose more of a risk than someone who applies for one loan amount from one place. That person is more likely to pay off what they owe than someone with more debt from other credit lenders.
Whenever you apply for credit, your provider will run a check on you to see if you're safe to lend to or not. So if you want to stay ahead and secure good credit, make sure you;
- Sort your bills.
- Pay debts on time.
- Fix mistakes on your credit report.
- And slow down on those credit applications.