If you’ve recently checked your credit score and discovered you have a good or even excellent one, then you might be thinking about how you can put it to use. 

Having a high credit score can help when applying for a credit card or loan, for example, as it can demonstrate to lenders that you have a positive track record of meeting your financial obligations. But it can be an advantage in other situations too, so here’s our guide to what you could be able to do with a high credit score, and steps you may be able to take to improve your score if it’s not as high as you would like.

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What is a ‘good’, ‘very good’, or ‘excellent’ credit score?

In Australia, your credit score is usually positioned somewhere on a scale between 0 and 1,200 or between 0 and 1,000 depending on the credit reporting agency you use to check your credit score. For example, one of the biggest providers, Equifax (formerly known as Veda), says a ‘good’ credit score to be between 622 – 725.

Here’s how Equifax determines whether your credit score is ‘excellent’, ‘very good’, ‘good’, ‘average’ or ‘below average’:

How might a high credit score help me?

Having a high credit score could potentially help put you in a strong financial position in a number of ways, such as:

1. More loan negotiating power

With a high credit score you may find you have more power to negotiate a better interest rate on your home, car, or personal loan than you would if you had a lower credit score. There is no guarantee a high credit score will equal a better rate, but it could be a tactic worth trying.

2. An increased borrowing capacity

Banks and lenders may be willing to let you borrow more money with a high credit score because you have demonstrated an ability to meet your repayments on time in the past. While it may be useful to be able to borrow greater amounts depending on your plans, it’s important to consider if you will be able to meet the increased repayments without placing strain on your finances.

3. A greater chance of being approved for a credit card or loan

While lenders take a number of factors into consideration before approving a credit card or loan application, your credit score will generally be one of the more influential factors in the outcome of your credit application. That being said, having a good credit score doesn’t necessarily guarantee loan approval; factors such as the amount of credit you’re applying for and your current financial situation, such as existing loans you have, could also help determine the outcome of your application.

How can I improve my credit score?

There could still be room to improve when it comes to your credit score. Here are a few steps to consider that could help put you in a stronger position:

• Paying bills on time: it’s an obvious but important reminder – paying all of your bills on or before the due date creates a consistent record of payments and may help to improve, or at least maintain your credit score. Could you set up a direct debit from your bank account or automate your bill payments in some other way to help you stay ahead?
• Thinking carefully about applying for new credit: applying for new credit can impact your credit score negatively. Even if your applications are successful, a large number of ‘hard checks’ (assessments of your credit history by lenders made in response to an application for credit) on your credit report in a short period of time can be a red flag to lenders. 
• Keep your credit card balance low: A consistently low balance may help you to build your credit score. However, if you’re repaying your credit card balance in full before the end of each interest-free period, the size of the balance you incur may be less of an issue. 

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