Your credit score is a number based on your history of borrowing and repayments that helps lenders work out how safe you are to lend to. A low credit score may seem like a deep hole to dig yourself out of, but it’s not impossible to recover from a lower-than-you’d-like credit score. That being said, it may require some discipline and work on your part.
If you’re currently comparing credit cards, the comparison table below displays some of the low rate credit cards currently available on Canstar’s database for Australians looking to spend around $2,000 per month. Please note that this table features links direct to the providers’ website, and is sorted by Star Rating (highest to lowest), followed by provider name (alphabetical). Use Canstar’s credit card comparison selector to view a wider range of credit cards.
How can you improve your credit score?
Some strategies that could help you to build up your credit score include:
1. Pay bills on time
This may seem obvious, but a record of consistent and punctual payments could make a contribution to a stronger credit score, particularly since the introduction of comprehensive or ‘positive’ credit reporting.
This could be especially important if the bill in question is worth $150 or more, as a missed payment of more than $150 can be recorded as a default on your credit report if it’s 60 days overdue. Defaults are one of the more significant black marks that can show up on a credit report. Consider setting up automatic payments to help you stay on top of your bills, and make sure to notify creditors, such as utility providers, if you move home so bills in your name aren’t going unopened. Many utility providers now allow customers to receive emails via email.
2. Think carefully before applying for any new credit
Whether you‘re approved or not, the fact that you applied for a new credit or loan product will show up on your credit report, which in turn may affect your credit score. A lender may view previous credit applications as a negative when considering your request for credit, particularly if there are a lot of them in a short amount of time.
That being said, we’re talking mainly about additional credit here. Applying for credit in order to replace or better structure one of your current credit products, such as a balance transfer or personal loan taken out to consolidate debt, may ultimately help you get on top of your debt and improve your credit score in the process. However, that’s provided you use it as an opportunity to actually pay down your debt and not simply to move it around. Be careful with this strategy, though, as each credit application is still recorded on your credit report and lenders may still view it as a red flag if they see a pattern of lending applications.
3. Pay down any existing loans and debts
You’ll generally have an easier time of improving your credit score if you’re making your regular loan and other credit repayments consistently and one time. But remember, as CreditSmart explains, even after a credit account has been repaid it will remain on your credit report for a time and could be reflected in your credit score.
4. Consider seeking the assistance of a financial counsellor
If you’re having trouble mapping out a plan for getting back on top of your finances and rebuilding your credit score, you could potentially benefit from obtaining free financial advice. They won’t be able to help rebuild your credit score on the spot, but they can help you formulate a path to a better credit score through structured and disciplined financial behaviour. Seeking financial advice, free or otherwise, does not affect your credit score.
5. Check your credit report for any inaccuracies
It could be worth going over your credit report with a fine-tooth comb to check that all the information listed is accurate. If your credit report does contain inaccuracies, it could be having a significant impact on your overall credit score.
Examples of potential credit report inaccuracies could include:
- Incorrect debt amounts or duplicate debt listings
- Debt you didn’t take out being shown (this can be a result of identity theft or other fraudulent activity)
- Repayments you made not being recorded
By cross-referencing your credit report against bank statements and other financial documents, you may be able to spot any inaccuracies on your credit report and have them amended. This in turn could help to improve your credit score. You can request a copy of your credit report from one of Australia’s three main credit reporting bodies: Equifax, Experian, and illion.
6. Hold onto credit cards you can manage
Keeping hold of credit cards that you can manage and pay off each month, can actually be beneficial. According to Credit Smart, someone with no credit cards could be viewed as a higher risk than a person who has a credit card and has demonstrated that they can manage it responsibly.
7. Lower the limit on any credit cards you have
If you have any credit cards open in your name, you could consider reducing the credit limit. Not only will this put a firmer limit on the amount of debt you can accrue, it will also be recorded as a positive action on your credit report. This means it may help to improve your credit score right off the bat, and then facilitate further improvement down the line by ensuring future debts stay smaller than before.
For more information on credit ratings, you can visit our credit score information hub.
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