It can feel like your value to a bank is a direct reflection on your value as a human in society.
So is the weight put on your credit score and your next big leap in life, that new car, investment or home. This tyrannical scoring process adopted by everyone dictates whether or not you will be getting that loan and even what interest you will be paying if you do.
A poor credit score is highly detrimental to your financial future. Mainly if that future is dependant on securing any type of credit. Credit enquiries and defaults on your credit file can drag down your overall score, barring you from getting finance when you need it most.
A credit score lower than 755 can really destroy your financial progress, forcing you to put your life on hold while you either wait it out or try to fix your score. Sad news if you believe your score of 650 was not that bad!
This score is a critical number to monitor if you’re a consumer seeking finance since it can drastically influence whether or not you can get credit and if you do how much interest you will be paying.
Lots of people don’t know what their Credit Score is, or that it even exists, meaning when they get knocked back, they don’t know why. For example, a recent client with good income was unable to obtain a loan with reasonable interest rates. She was unaware that her credit was causing lenders to quote much higher than average rates.
You can imagine how shocked she was when we tabled a copy of her credit score and explained how credit providers use that information to quote higher interest rates. Undertaking a client like this means we go through her file and clean up, what was mostly unauthorised enquiries over the course of two months.
This alone drastically improved her credit score; enabling her to go for a more competitive loan than the one she initially got knocked back from.
If you are struggling with your credit score, here are some ways to help you through it:
- Stay where you are: Staying in the same job or living at the same address can stop your Credit Score from dropping, it shows consistency and commitment; a desirable trait in a loan applicant.
- Order a copy of your credit file: This enables you to see precisely how well you’re doing. You can get a free copy of your credit file every 12 months.
- Avoid shopping around: Applying online or in-store to several credit providers can rack up enquires on your credit file, impacting your credit score.
- Remove outdated info: Credit providers often forget to remove old enquires or defaults on consumers credit file. It is essential you alert your credit providers and the credit reporting body of these mistakes the moment you find them, as they’re damaging your credit score.
- Always be on time: Making payments consistently and on time is an excellent way to improve your credit score. It shows you’re never one to be late or behind on your payments.
- Monitor your credit report to ensure credit reporting bodies and credit providers remember to remove enquires and defaults are due to drop off of their file. They have a vast number of customers; so mistakes are bound to be made.
Equifax, Australia’s largest consumer credit reporting body, released a report late last year highlighting what affects your credit score.
Equifax stating on their website that Adverse Listings and Credit Enquiries negatively affect your score, these include;
- Your payment history
- Number of credit enquiries on file
- Number of credit enquiries in the last month
- Type of credit requested (payday loans for example)
- Shopping for credit cards or loans online