Top tips on improving your credit file

Are you considering applying for a loan? If so, it’s time to look at your credit file and credit score. 

What is a credit file? 

A credit file is like a report card. It gives you a rating based on your financial history. It’s one of the first things lenders will look at when considering their risk, and your reliability, when it comes to making repayments. 

Your credit file lists the previous enquiries you’ve made for credit and your repayment history pattern.  

The file lists finance from lending institutions, as well as your history with utility retailers such as energy and gas, buy now pay later (BNPL) services, and phone plans.  

These combine to provide an overall score. This score gives lenders insight to your risk grading, determining your suitability for a loan. Most lenders have a minimum credit score requirement to approve finance and will assess your file to determine whether you fall within their lending parameters.  

What’s impacting my credit score? 

• Late payments on debts. Each time you fall behind on a repayment, it is marked in your credit history and reduces your overall credit score. 
• Defaults. This occurs when you have overdue debt that has not been paid. This usually means a lender has attempted to contact you multiple times to make repayments, and you haven’t responded within a reasonable timeframe. The default amount will be lodged on your credit file for five years and can severely impact your ability to secure finance. 

• Frequent inquiries. This one is a common misconception. This refers to formal applications for credit or essential services, such as power or gas. Your overall credit score can be weighed down by the amount of inquiries you make, especially if there are multiple inquiries within a short space of time. It can be perceived by lenders as ‘shopping around’ for finance or give them the perception you have been knocked back by other lenders.  
• Stability. Your longevity in jobs and your home address effects your credit score. If you are moving jobs or address frequently; it can signify instability to lenders. 

What if I have multiple debts? 

If you are making repayments on time your debts will not impact your credit score. In fact, it may help your future ability to secure a loan. It shows prospective lenders that you can meet your repayment obligations and helps them in evaluating your credit assessment. The higher your credit score, the more attractive it is to a lender to provide you your required funds.  

How can I improve my chances of securing finance? 

• Pay your bills before the due date and avoid follow-ups from utility providers 
• Make your debt repayments on time 
• Try not to check your score too often 
• Avoid BNPL services and pay upfront 

Low credit scores, late payments, and past or current defaults do not necessarily eliminate your chances of obtaining finance. There are lenders who can assist you, but may offer a higher rate of interest to compensate for the additional risk. 

How do I find my credit score? 

If you are unsure of your credit score you can find out through Equifax. Equifax is one of Australia’s leading credit reporting agencies and you can request a copy of your credit file for free.  Click this link to request your free copy. 

Getting to know your credit file and score is one of the first steps to bettering your financial health. It offers invaluable insight into your repayment habits, financial history, and likelihood of obtaining finance.  

If you have any queries on credit files or your specific financial situation, reach out to us at: https://www.duofinance.com.au/contact-us/