How to improve your credit score?

What is the fastest way to boost credit score?

There are a number of things you can do to improve your credit score quickly, and other things you can do to improve it over a longer period of time. Before you get started: you need to check your credit score to see what your baseline is.

You can check your credit score for free through Finder. It takes a couple of minutes and then you'll know exactly what your score is. You'll get a score between 0 and 1,000. The higher the better.

Along with the score you'll get your credit report, which contains:

• A 24-month history of your loan repayments, including late payments or defaults.
• Information about your credit accounts (loans and credit cards).
• Any enquiries or requests made by lenders for your credit report in the last 5 years.
• Any bankruptcies or court judgements in your name.

Once you have your credit score you can identify the best ways to increase it.

5 fast ways to improve your score

1. Correct any mistakes in your credit report

Look at the details contained in your credit report. If it all looks accurate, then jump to step 3. But if you find any errors you can get them corrected and your credit score should increase pretty quickly.

Here are some examples of possible errors:

• Incorrect personal information
• Incorrect missed payments or defaults
• An unpaid debt you were never notified about
• Enquiries made on your behalf for credit you never applied for

You can request a correction on your credit report through the agency that issued the report. And you can contact the credit provider that made the mistake directly.

You'll need some personal identification, plus the report, the specific detail you're challenging and evidence of the error.

2. Pay off late payments and defaults

Fix the biggest issues dragging your credit score down as soon as possible. Red marks on your credit report are usually:

• Missed payments. If you've missed a payment on a bill by more than 14 days it is recorded on your credit report for 2 years.
• Defaults. If a repayment is more than 60 days overdue and the amount is $150 or more, a default is recorded in your credit report. Defaults stay on your report for 5 years.

Prioritise paying off any outstanding debts, especially a default. Make sure you pay any missed payments before the 14 days if possible. Paying off an outstanding payment looks better on your credit report but the missed payment or default is still recorded.

3. Make regular repayments on your debts

It sounds obvious, but don't miss a payment on your credit card or loan. Pay off at least the minimum on your credit card before it's due.

4. Close a debt account

If you have a credit card you hardly ever use, a personal loan nearly paid off or any other debts you can pay out and close, doing so will instantly give your credit profile a boost.

This is because when you cancel a credit card, you're reducing the amount of overall debt you have access to. This is seen as a positive and may improve your credit score.

5. Lower the limit on your credit card

If you already have a credit card and you're making repayments on time, you can further improve your credit score by lowering the card limit. That's the maximum amount you can spend using the card.

It's much easier to get into financial trouble with a card that lets you spend $10,000 versus one with a limit of $2,000. If you don't need to make big purchases on your credit card, lower your limit and your credit score should increase by the following month.

5 fast ways to improve your credit score over time

1. Pay your bills on time

Your credit record collects both positive data (all the years you've spent paying your phone, internet, electricity and gas bills on time) and negative data (late payments, defaults). When you pay your bills on time, you're building a positive credit score over time. Setting up direct debits for your bills (or even automatic reminders) is the easiest way to do this.

2. Take out some credit products

You might think someone who has never had a cent of debt to their name would have a perfect credit score. But that's not the case.

To prove you are a reliable borrower you need to actually have a history of managing debt responsibly. If you've never had a loan or credit card before it can be hard to show this. You can start to build your credit rating with a credit card.

Just make sure:

• You keep the credit limit low
• You actually use the card to buy things
• You make regular repayments on time
• The card has low fees

3. Avoid multiple debts, especially high interest ones

Having some debts is good – a borrower with a single credit card and a home loan who never misses a repayment is likely to have a strong credit score.

But if you have 3 credit cards and 2 personal loans, you may struggle to improve your credit score even if you never miss a repayment.

If you can cut down to 1 or 2 credit cards and consolidate your loan debts you can lift your score.

Alternatively, prioritising paying off one of the loans completely would help too. A balance transfer credit card can be the best way to roll card debts into one manageable debt.

4. Watch out for buy now pay later

Buy now pay later (BNPL) products like Afterpay might not seem like credit products. But using BNPL can harm your credit score.

Missing BNPL repayments will hurt your credit score. And some BNPL providers make a credit enquiry when you sign up, meaning the company takes a look at your credit report. This can impact your credit score too.

5. Avoid applying for too many credit products at once

When you apply for a loan or credit card the lender requests a copy of your credit report. This is called a hard inquiry and it can negatively affect your report.

This is because multiple applications for credit in a short time are considered a bad sign.

To avoid this:

• Don't apply for multiple debts at once
• Apply for a single credit product from a single provider
• Make sure your application is completed correctly and that you're eligible for the product before you apply

Finder survey: Have many Australians have taken steps to improve their credit score?

More tips to boost credit score in Australia

Time heals all credit wounds

If you've had a very bad run with your finances – missed payments, defaults, a bankruptcy – then time is your friend.

In Australia, defaults stay on your credit report for 5 years. Missed payments stay for 2. If you were declared bankrupt, the bankruptcy stays on your report for 2 years from the end date or 5 years from the date you became bankrupt (whichever of the 2 is later).

So while all the tips we've outlined above are very useful, for people with terrible credit the passage of time also helps a lot. Just avoid getting into more credit trouble in the meantime.

Credit repair companies

There may be mistakes on your credit report you can fix. And there are companies that offer credit repair services who can fix those for you.

But these companies can charge high fees and are often just doing things you can easily fix yourself, for free.

Keep a good credit card

Paying off debts completely is good financial advice. But it's often worth keeping a credit card you rarely use and have always paid off on time. This card is a good example of your creditworthiness.

Just make sure you keep the limit as low as possible.

Get help

If you're struggling to make repayments and need financial help you have options:

• Talk to your utility and credit providers. Before you miss a payment talk to your providers. They have hardship support schemes and payment plans available for customers.
• Get free financial counselling. The National Debt Helpline has free financial counsellors you can speak to on 1800 007 007.

What our credit score members are saying

Finder helped me improve my credit score, and find the best credit card and high interest saving account.

Jose, VIC

Understanding my credit score and where my expenses go has helped me spend less on material items and save more to set me up for later in life.

Mikayla, SA

Finder has been super helpful for me to run a credit score check, which I've never done before, and find out where I'm sitting financially – thank you!

Tom, SA

Written by

Richard Whitten

Editor

Richard Whitten is a money editor at Finder, and has been covering home loans, property and personal finance for 6+ years. He has written for Yahoo Finance, Money Magazine and Homely; and has appeared on various radio shows nationwide. He holds a Certificate IV in mortgage broking and finance (RG 206), a Tier 1 Generic Knowledge certification and a Tier 2 General Advice Deposit Products (RG 146) certification. See full bio

Richard's expertise

Richard has written 553 Finder guides across topics including:

• Home loans
• Property
• Personal finance
• Money-saving tips