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Whether you are applying for a credit card or taking out a personal loan, you may be thinking about how to increase your credit score. Having a good credit score can help you to negotiate better loan terms and be offered a lower rate of interest, as well as making sure you can secure a loan or credit card in the first place. The good news is there are several things you can do to improve credit rating and build your credit score over time.

Firstly, what is a credit score? A credit score or credit rating is used by banks, lenders, and credit providers to determine how creditworthy you are when determining whether or not to provide you with credit or lend you money. Your credit score will be a number either between 0 and 1,000 or zero and 1,200 depending on the credit reporting agency. The better your credit score, the less risky you will be perceived by your credit provider. As well as determining whether they will give you credit or lend you money in the first place, your credit score can also impact how much money you will be able to borrow or your credit limit, as well as your rate of interest. This could mean that someone with a higher credit score could secure a better deal than someone with a lower credit score.   

Anyone in Australia who has previously applied for a loan or credit will have a credit report about them that will contain personal and financial information, and their credit score will be based on this data. As well as a credit score, they will also be given a credit rating such as low, fair, good, very good, or excellent. If you are wondering, ‘What is my credit score?’ or want to get a copy of your credit report for free, you can find out more about how to check credit scores and credit reports on the Australian Securities and Investments Commission’s (ASIC) Moneysmart website. As your credit score will change over time, you are entitled to get a free credit report every three months. 

When looking at how to increase credit score, you’ll also need to ask, ‘How is credit score calculated?’ Your credit score will be based on the information that is included in your credit report such as how much money you’ve borrowed, whether you have made your repayments on time, and the number of credit applications you’ve made. Your credit report may also include information such as defaults on utility bills, bankruptcies or debt agreements, personal insolvency agreements in your name, and court judgements.  

If you are looking to take out personal loans or apply for a credit card, obviously you’ll want your credit score to be as high as possible to help you get favourable terms and a low interest rate. So how can you boost credit score? Not all credit scoring agencies will calculate credit score exactly the same way, but if you are wondering how to improve credit score, there are some suggested measures you can take. Whether it’s your mortgage, rent, credit card, or utility bills, if your credit score is low, one step you can take to try to improve your credit score is to ensure you pay your bills and payments on time. Paying your credit card back on time can not only help you improve your credit score but can also help you to avoid late fees or paying any extra interest. If you pay back extra money on top of the minimum repayments or pay back the amount in full each month, you’ll save even more money on interest. If you have several credit cards and loans, it may be worth considering consolidating your debts as this may make your repayments easier to manage. 

Other ways that may help with rebuilding credit score are lowering your credit card limit and limiting how many credit applications you make. Even if your credit card or loan application gets declined, the application will still appear on your credit report. If you make a lot of applications in a short space of time, this might indicate an issue to your bank or money lender, and it may negatively impact your credit score.      

If you think your credit score is higher than it should be, it could be worth doing a credit score check to make sure all the information that has been recorded in your credit report is accurate. For example, the amount of a debt may be incorrect or a debt may be reported twice. If the credit reporting agency has made an error, you can contact the credit reporting agency directly, and they should be able to fix it for free. They can also update any personal information such as your name, address, or date of birth if this is incorrect. If it is your credit provider who has reported incorrect information, you can contact them and ask them to get the incorrect information removed. There may be a delay between when your lender reports your information to the credit reporting body, so repairing credit rating may not happen immediately. To find out more about fixing errors on your credit report, head to ASIC’s Moneysmart website. 

Another good way to improve your creditworthiness is to build a good relationship with your money lender. As well as using a credit score that has been worked out by a credit reporting body, some lenders may calculate their own score. For example, if you are applying for a MONEYME personal loan or a Freestyle virtual Mastercard, we give our customers a MONEYME loan rating score from A1+ to A5+ that is mainly determined by your credit history. Every time you take out a MONEYME loan and make your repayments on time, you can improve your MONEYME loan rating. By doing this, you may be able to borrow at a lower cost next time you apply for a MONEYME product. At MONEYME, we like to reward our customers for a good repayment history. 

MONEYME is a responsible lender, so although we will conduct a credit check when we are assessing your loan application, this doesn’t mean we automatically decline anyone who has a mark on their credit file. We also look at the big picture and understand that you may have good reasons for your situation or your financial circumstances have improved. Even if we decline your application the first time round, for example, if you are bankrupt, have a poor credit history, or in a debt agreement, you are very welcome to apply again at a later date if your situation changes, and hopefully next time your application will be successful.