How to Improve Credit Score in Australia: A Full Guide

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A great credit score can make the difference between a successful application for a home loan and a rejection. It can influence whether you’re worthy of credit or unable to receive credit for your financial situation.

Since a good credit score is critical, it’s important to know how to improve your credit score in Australia if your goal is to be accepted for credit or a loan, even if you’re returning from abroad as an Australian expat.

So, if you’re unsure how to improve credit score in Australia, this article will clarify what you need to do!

What is a credit score?

Just before we get into the tips that will help you learn how to improve credit score in Australia, let’s quickly define three things. First, when we use the phrase “credit score”, this refers to a number that is calculated by credit reporting bodies and is used to determine whether you’re creditworthy.

The table just below shows the different credit score categories and the numbers that indicate the range you must meet to fall into each category.

We have provided the categories for three Australian credit reporting bodies–Experian, Illion and Equifax–who each have their own specific credit score ranges.

Credit Score Classification

Experian

Illion

Equifax

Low

0 – 549

0 – 299

0 – 509

Fair

550 – 624

300 – 499

510 – 621

Average

625 – 699

500 – 699

622 – 725

Very good

700 – 799

700 – 799

726 – 832

Excellent

800 – 1000

800 – 1000

833 – 1200

If your credit score is high, you’re more likely to get favourable credit conditions and terms as you will be thought of as a low risk as a borrower.

On the other hand, with a low or bad credit score, you’re less likely to qualify for credit and receive favourable credit terms, mortgage rates, or credit limits with lenders.

What is a credit report?

Next, let’s clarify what a credit report is. A credit report is a document that you can receive from a credit reporting body that outlines the credit you have applied for and how you have managed your credit in the past. 

Credit reports also contain details on the amount of debt you have and your overall credit history, which will help you answer the question how to improve credit score in Australia.

credit-report

If I request a credit report from an Australian credit report body is my credit score affected?

No. If you request your credit report, this will not affect your credit score. It actually can help you to solve the challenge and answer the question of how to improve credit score in Australia since you can check it thoroughly to ensure it is accurate and that you’re not a victim of identity theft.

You might have been declined for a home loan application or a mortgage and been completely unaware that incorrect information on your credit report was to blame. Requesting a credit report is the best way to check this and make sure your credit report contains accurate details.

Get a free Australian mortgage assessment today.

Apply online to get a free recommendation with real rates and repayments.

Top 11 tips on how to improve credit score in Australia

Now–the tips. The following 10 tips will ensure that your credit score is top-notch when it comes to making an application for credit or for a home loan. So let’s take a look.

1. Assess your credit score by getting a credit report

The first step involves getting yourself a copy of your credit report. This will ensure you understand the current state of your credit score and indicate the particular areas that need improving.

Now, there are a few credit reporting bodies that you can consult to get a copy of your credit report. The main providers of credit reports in Australia are:

  • Illion
  • Experian
  • Equifax

It’s legally possible to receive a credit score report every year for free, or to solicit for a credit report if you’ve been rejected for credit, and you ask for the report within 90 days of the rejection. This way you can see how to improve credit score in Australia and take measures to improve it. 

So, once you’ve received it, check your Experian credit report, (or your Illion or Equifax report) and then think about the approaches you must take to improve it.

If you need to find out how to improve your credit score in Australia and wish to check a credit report more often, instead of a free credit report, you may have to pay a fee to receive one. 

2. Make sure your credit report is accurate

There are a couple of things to watch out for when you’ve got your hands on your credit report. Your credit report might contain an error. It’s possible that you were a victim of identity theft, or that your financial institution / financial institutions might have made a mistake.

Any credit report errors or inaccuracies will need to be investigated, and you will need to get in touch with your credit provider and the privacy commissioner’s office to discuss this.

Ensuring that your credit report is accurate is a critical step when thinking about how to improve credit score in Australia. It helps you focus on what needs to be done to enhance your credit score without looking at incorrect details. 

3. Apply for and use a credit card efficiently to build your credit file

Building a credit file is your next step, and one of the first ways you can do this is to begin by applying for a credit card account. Credit card accounts will help with improving your credit score in Australia, enabling you to start showing credit reporting bodies and lenders that you can handle and manage your credit. 

What’s critical when you apply for a credit card with a credit card issuer is that you make on time payments. So, if you’re returning from abroad as an Aussie expat and want to improve your credit score, the key is to show that you can avoid delayed repayments.

One notable fact to keep in mind about how to improve credit score in Australia is this: If you have zero debt, this isn’t necessarily going to put you in a better scenario. 

Credit providers want to know how you manage your debt effectively. If you have no credit card debt, this will not be an indicator of effective debt management. Instead, having debt and making credit card payments on-time is crucial for your credit score. And making credit card repayments will help with this.

Does paying off all debts mean my credit score will be high?

This is not always the case. You may still have a poor credit history going back over the years, which can still impact your credit score. You might have defaulted on a credit card repayment in the past, which might still affect your credit score, with some credit providers retaining the defaulted payments on your credit report for five years.

4. Avoid making applications for multiple credit cards

When you’re thinking about how to improve your credit score in Australia, it’s vital that you get the right balance between applying for a credit card and avoiding making applications for multiple credit cards.

Your credit score can decline if you make applications for credit cards too frequently. If you want to improve your credit and avoid a low score, avoid making applications for multiple credit cards with several different credit card companies.

By all means apply for one credit card to demonstrate that you can handle your debt, but watch out for a decline in your credit score if you make too many applications.

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5. Make regular repayments effortlessly by setting up direct debits

Since you might already have personal loans, you can use these to your advantage when trying to improve credit scores in Australia. They are another opportunity to demonstrate your ability to handle debts efficiently and show that you are a low risk to lenders.

Now, since late payments are not the best way to improve your low credit score, you will need to demonstrate that you can consistently repay your debts. The ideal way to do this is to set up a direct debit or automatic payments to repay your personal loans and never be late with repayments.

Alternatively, if you prefer, you might choose to set up some reminders to ensure that you never miss a repayment and that you make on time payments. With prompt payments you’ll increase your credit score and ensure you can get approved for a personal loan, a mortgage to finance a property, or a credit card account. 

Get a free Australian mortgage assessment today.

Apply online to get a free recommendation with real rates and repayments.

6. Pay bills and make your repayments on time

If you are looking for how to improve your credit score in Australia, there’s another way to achieve this. When you pay bills and make your repayments on time, you can avoid being referred to a credit reporting agency and, in turn, avoid having defaults being recorded on your credit report.

In this sense, paying bills, avoiding overdue debt, steering clear of outstanding debts, avoiding missed payments and avoiding defaults will keep your credit report free from negative information and ensure you’re approved for credit thanks to your stronger credit score.

7. Manage multiple credit and loan types

If you have several credit or loan types and can manage them efficiently, this will have a positive impact on your credit score. You might have a personal loan, an auto loan, a home loan, or a mortgage. You might have several loan types that you have to manage.

Proving that you can manage multiple credit and loan types will lead to an increase in your credit score as this will demonstrate that you are a low risk.

8. Reduce your credit limit for your credit cards

Choosing to reduce your credit limit for your credit cards is one option that you can take if you’re wondering how to improve credit score. Reducing your credit card limit can help you limit the debt you take on and, as a result, manage your debt more effectively and enhance your credit score.

9. Weigh up your options and think about the credit you apply for to avoid credit stress

Credit stress is one thing to be aware of and is linked to multiple credit applications with various different lenders.

Since credit stress can have a negative impact on your credit score, and since any credit applications will be shown on your credit report, it’s wise to think about your credit options before you apply. 

Avoiding multiple credit applications is critical, however there are some shrewd options that might benefit your credit score and help you overcome the challenge of how to improve credit score in terms of credit replacement.

Now, if you choose to consolidate debt with a personal loan, or choose an option to structure the debt better, this can be a positive thing for your credit score. But always remember that you must make on time payments and actually pay your debts, as opposed to shifting them around without managing the debts efficiently.

10. Always inform lenders if you move residential locations

Are you an Aussie expat returning to Australia looking to move homes or relocate to different locations within the country? What’s important for your credit report in this case is that you must inform your lenders when you move to different residential locations.

The key reason that this step is so crucial is that you might still have an overdue debt noted on your credit report because your credit providers will be unable to forward the bills to your new address.

Since you won’t be aware that your bills aren’t reaching you, you might not make the repayments on time. This is why you must inform your credit providers if you choose to move to a different location.

How to Improve Credit Score in Australia: A Full Guide

11. Arrange financial planning support or reach out to your provider to improve credit score

Financial planning can help significantly with making it easier for you to make timely repayments. This can mean that your credit score also sees the positive results of exceptional money management and debt repayment.

Alternatively, you might choose to reach out to your credit provider in individual, personal circumstances where you require extra support. In situations like these, you could be offered assistance for financial hardships.

If you choose to seek financial support, you won’t have to make payments and you will be supported confidentially. You will be able to get great advice about budgeting and creditor negotiation. 

Of course always be wary of credit repair companies, or organisations that claim they can get rid of negative credit information. That credit activity or credit history, if it is correct, cannot be removed from your credit reports.

Rebuilding credit scores: How long does this take?

The short answer is that it depends. The length of time it takes to rebuild a credit score depends on a few different factors. 

You might make one missed payment and find it easy to recover and rebuild your credit score in situations like these. You might, however, miss payments across various credit accounts, which might take longer to recover from these missed payments.

In situations where you struggle to make payments and face repossession, this can take a lot longer to rebuild. And if you fall behind for longer than 90 days, you will also find that it will take a long time to rebuild your credit score.

One thing to remember is that over time, your negative marks can diminish. Once seven years have passed, a negative mark will no longer impact your credit report.

Get a free Australian mortgage assessment today.

Apply online to get a free recommendation with real rates and repayments.

5 things to keep in mind that can impact your credit score

If you need to find out how to improve your credit score in Australia, it’s also important that you’re aware of the key factors that can impact your credit score. Have a look at the five factors that can impact your credit score just below.

credit card

1. The credit type you have applied for in the past

There are several different types of credit that you can apply for, and these can impact your credit score. The main reason that different credit types can impact your credit score is that there are different risk levels associated with each credit type.

You might apply for store finance, or a home loan. You could apply for a personal loan, or a credit card. But just bear in mind that each credit type is different and has different risks from the perspective of a lender or credit reporting body.

2. How many applications for credit you make

When thinking of how to improve credit score in Australia, it’s important to try and keep the number of enquiries that are logged on your credit report low. Since each credit application you make results in an extra enquiry, avoiding making too many applications is key to improve credit score in Australia.

3. Whether you have defaulted on any credit or loan repayments

If you have any overdue debts or infringements noted on your credit reports, or you have defaulted on a loan, this is another factor that can impact your credit score. In contrast, making sure you don’t have any default information is one factor that can positively impact your credit score. 

It’s therefore important that you avoid defaulting on credit or loan repayments. This is key when thinking about how to improve credit score in Australia as it will affect your credit score.

4. Your employment details and your personal details

Some credit reporting bodies will monitor your employment history–specifically, the length of time that you have been employed with the company you currently work for. They might also monitor your contact details and personal details, such as how old you are.

Credit reporting bodies might also check to see how long you have lived in your place of residence. Each of these factors can be considered “factors of stability” that assess whether you are capable of making repayments on time.

5. The loan size or amount of credit you have applied for

The loan size or amount of credit you have applied for is one essential factor that can impact your credit score. Say you make an application for a smaller loan size or a smaller amount of credit. Well, this comes with less risk when compared with a large loan or a large amount of credit from the perspective of a lender.

Get a free Australian mortgage assessment today.

Apply online to get a free recommendation with real rates and repayments.

Credit scores: How do credit reporting bodies calculate them?

A credit reporting body will calculate your credit score by using an algorithm that takes the information in your credit reports and makes predictions based on this data to calculate the amount of risk that lenders face when choosing to offer you credit. For this reason, your credit report is vital for knowing how to improve credit score in Australia.

credit score

How to improve credit score in Australia: Get your credit score perfect

A perfect credit score can open doors for your personal circumstances. It can give you opportunities to apply for a mortgage or home loan and start the exciting journey to becoming a homeowner.

When answering the question how to improve credit score in Australia, remember that timely repayments to your credit accounts (across your whole credit file) will put you in the best position to enhance it. Get more details and information on credit scores and home loans at odinmortgage.com.

How To Improve Your Credit Score in Australia Frequently Asked Questions

Which credit score is required for mortgage approval in Australia?

As opposed to an exact credit score, mortgage approval often depends on meeting or exceeding an average credit score to be accepted for a mortgage. In Australia, most lenders consider a score between 500–700 an average score, and you can potentially be approved with a score such as this. But the higher the score, the better chance you have.

How can I save money in terms of interest rates with my credit score?

You can save money in terms of the interest you must pay for a home loan or mortgage by increasing your credit score. Since a high credit score gives you more options, you can select between different lenders and find one with the best interest rates.

Can I purchase a property in Australia if I have a bad credit score?

If you want to purchase a property in Australia and have a bad credit score, you must check your credit report, see if there are any errors and then try to improve your credit score. You might have to accept a mortgage offer that has a high interest rate if you can’t increase your credit score and/or start saving to make a larger down payment on the mortgage.

What should I do if I have a bad credit score and want to purchase a property in Australia?

If you want to purchase a property in Australia and have a bad credit score, you must check your credit report, see if there are any errors and then try to improve your credit score. You might have to accept a mortgage offer that has a high interest rate if you can’t increase your credit score and/or start saving to make a larger down payment on the mortgage.

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