If you're afraid of a bad credit report separating you from a new loan, it’s never too late to take action to improve your credit rating.
Comprehensive credit reporting, which collects more information about your lending history, means that lenders and insurers will not just see your late payments. They will be able to see the steps you take to improve your credit health. Here are some tips for reducing bad credit.
1) Audit Your Credit Report
Before you take any steps to improve your credit rating, you must make sure you get a complete and accurate picture of your credit situation first.
The most effective way to do this is to request a free copy of your comprehensive credit report. In addition to reviewing your credit report, you should also ask your lender and any other creditors for a copy of your credit report.
This way, you can compare all the information listed in your report and dispute any inaccuracies.
2) Understand Your Credit Report
Your credit report is the first place lenders and credit card issuers look when assessing your credit history. The report summarises how well you manage your payments, as well as how often you borrow and from whom.
Check your report and list the payments you made for each creditor. Make sure that only accurate information is listed. Also, check whether any information is listed for accounts that you don’t recognise.
3) Freeze Credit
Freezing your credit is one way to increase your credit score. While this may sound counterintuitive, it actually helps lower your credit utilization ratio.
This ratio is the amount of available credit you use, which is usually a factor in the credit score calculation. Any activity that increases the amount of credit you have available, but does not have a corresponding increase in your credit utilization, will improve your credit score.
4) Have Realistic Credit Goals
Another key to improving your credit score is to set realistic goals. Focusing on making payments on time and reducing your debt will work faster than trying to completely eliminate a high credit card balance.
Your credit score is affected by the amount of available credit you have, the percentage of your available credit that you use, and the length of your credit history. To increase your credit score, you must make sure your credit utilization is low and that you have a history of using credit responsibly.
5) Seek a Professional Opinion
If you find that you have several delinquent accounts and you have not taken the steps to improve your credit score, you may want to consult a professional.
A certified credit counsellor or a financial advisor can help you devise a plan to repair your credit. They can also evaluate your financial situation and help you become more aware of your credit choices.
In many cases, the cost of hiring a professional to work on your credit washes out in the long run. The better your credit, the better your rate will be when you’re ready to do business.
The path to building a healthier credit score is a lot like the path to building a healthier financial lifestyle. In both cases, you must take small steps that lead to the big picture.
If you believe you don't have the ideal credit score, try looking for alternative finance providers. Wealthy You is home to Australia's leading home loan debt consolidation experts. Get in touch with us today to talk about your future.