A credit score is the way credit providers assess the level of risk a person is towards paying credit such as a loan back. A credit score ranges between 0-1200 with the higher the score being the most likely to repay and the more reliable. Your credit score ranges from:
- Excellent (833-1200)
- Very Good (726-832)
- Good (622-725)
- Average (510-621)
- Below Average (0-509)
bad credit score can have a negative impact on your life, it can be the reason
you haven’t been approved a house or that you have a high interest rate. Most
people don’t check their credit score, however, if you want to be approved a
loan its important to see what you have and whether you need to improve. One of
the largest credit reporting bodies is Australia is Equifax, if you want to
receive a free credit check here is the link to her website:
What Makes Up Your Credit Score?
Your credit score is made up of different factors that affect how high or how low your credit score is. These factors include:
- Payment history (35%)
Your payment history is the conduct of how you pay bills.
- Mix of credit (10%)
Your credit mix is what type of credit you have eg. Mortgage and car loans.
- Length of Credit History (15%)
The length of your credit refers to how long you have had credit for.
- Amount Owed (30%)
Your amount owed is what credit streams you currently have and how much you need to pay.
- New Credit (10%)
Your new credit refers to any enquiries you’ve had to get credit will be displayed here
Ways to Improve Your Credit Score
Your payment history takes up a big part of your credit score. It’s the record of any payments you’ve made whether they are on time, late or you’ve missed a payment. This include how late the payments were, how much you owe and how recent the payments were. A way to avoid this happening is to set up direct debit straight out of your account or set up reminders on your phone.
Minimize Credit Card Balances
A great way to improve your credit score is to stop applying for credit cards and consolidate your debts. You can do this by meeting the minimum monthly requirements, cutting up any credit cards you aren’t using and using a debit card. Ways to consolidate your debt includes using a balance transfer credit card that allows you to put all your debt onto one credit card which has a lower interest rate.
Paying Off Your Debt
30% of your credit score is made of how much debt you currently have. Your level of debt is calculated through your credit card balance and credit limit ratio. The higher your credit card balance, the more it is going to hurt your score and the same with missing payments. Because how much you owe makes up 30% of your credit score, by paying off your debts it could improve your credit score.
Maintain an Emergency Account
We never know when something is going to happen, its important to be prepared anyway. If you don’t have money set aside in case there is an emergency, it can lead you to borrow money and put yourself into more debt. if a person is desperate then they are more likely to not research their loans and end up with a higher interest rate.
Don’t Ignore Warning Signs
Ignoring your bills can make matters worse and could potentially ruin your credit score. It could lead to defaults or judgements that remain on your credit file for 5 years. Pay bills on time and minimize your credit cards and it will fix your credit score.
If you need any help with repairing your credit file, ECON Business Solutions can assist you. Our credit management department consists of a team that takes a personal approach by taking you through the credit file process. We aim to educate our clients on ways to improve their credit score by understanding their lifestyle and tailoring a financial plan accordingly. Feel free to contact us for a FREE consultation and we can help you achiever a better financial future.
Call: 03 95456552