Bessie Hassan | Money expert at finder.com.au

Whether you have a great credit score, a bad one or you’re confused as to what the numbers actually mean, improving your credit score will shape your financial future for the better. A good credit score can help you get a discount on your home loan or help you secure new finance.

Here are six ways that you can improve your credit score with minimal effort.

1)  Check your credit report

Your credit score is based on the historical borrowing and repayment behaviour listed in your credit report. Checking your credit report on your own won’t have any impact on your credit score. However, if a lender requests your credit report, it may leave a negative mark. This is why you should be careful of how many lenders you approach for a loan, as it will often prompt them to check your report.

Checking your history yourself allows you to see what activities have affected your credit score, giving you a better understanding of what you should and shouldn’t be doing. You might also be able to find any mistakes that have been made by credit reporting bodies and take action to correct them.

2)  Make sure you have a borrowing and repayment history

Having debt doesn’t sound like it would improve your credit score but a completely blank credit report doesn’t assure lenders that you’re a responsible borrower. If you don’t have any loans, it might be a good idea to start using a credit card, even if you only use it to pay for petrol.

3)  Pay your bills on time

Once you have debt, it’s important to pay it off on time. Missed or late payments on credit contracts such as credit cards, personal loans and home loans can negatively affect your credit score. Making the minimum payment on time will show healthy borrowing behaviour.

To make this easier on yourself, set calendar reminders on your phone or computer so that you don’t miss a due date. If you’re sure that you’ll always have enough in your account to pay your bills, try setting up a direct debit to automatically pay the bills when they’re due. Also make sure to let any banks or lenders know your new address if you’re moving. That way, you’ll prevent yourself from missing your bills and having them listed as defaults.

4)  Lower your credit limit

A recent survey from finder.com.au found that two-thirds of Aussies believe that only your credit utilisation ratio (that is, how much of your credit that you’ve actually used) affects your credit score. However, in Australia, only your credit limit is recognised rather than how much you’ve borrowed out of it.

For instance, if your credit card has a $6,000 credit limit and you’ve only borrowed $1,400, the only figure affecting your credit score will be the $6,000. Therefore, it’s a good idea to lower your credit limit to $2,000, or to whatever credit limit is just enough for you.

5)  Consolidate your debt

If you have several loans, consolidating them all into one account can make it easier to manage your repayments. It will also reduce the risk of any negative activity on your credit report and it can help you save on fees and get you a lower interest rate.

6)  Check your credit score regularly

The final way you can actively improve your credit score is to check it regularly. Getting your credit score doesn’t require much effort or time. All you need to access your credit score for free is your email, name, sex, date of birth, driver’s licence and your address.

Once you’ve made an account, checking your credit score is easy. Generally, your credit score will change every month if there is any new activity on your credit report.

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Ultimately, improving your credit score comes down to proving that you’re a responsible borrower that can make punctual and regular payments. Ensuring that you borrow within your means and never miss a due date can almost definitely lead to an improved credit score.

Important Information

The information on this website is general advice only.  This means it does not take into account any person’s particular investment objectives, financial situation or investment needs. If you are an investor, you should consult your licensed adviser before acting on any information contained in this article to fully understand the benefits and risk associated with the Raiz product.

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