Liz can’t remember how she landed on the GetCreditScore website back in late 2019. It may have been through a social media ad. Or it could have been through a link in an email. It doesn’t really matter how she got there, though – she’s just glad she did.
“I had no debt apart from a mortgage, and was planning on applying for finance to buy an investment property,” says Liz. “I can’t remember how I got to the GetCreditScore website, but I did, and I thought it would be a good idea to check my score before going to the bank.”
Fate had intervened.
Liz entered her details and was quickly told her credit score was 639. Not bad, but not great either. Credit scores range from zero (bad) to 1200 (brilliant), and Liz couldn’t understand why hers wasn’t more towards the top end of the scale.
“I couldn’t understand it, really – the mortgage was pretty low compared to the value of the house, and I didn’t have any other debt,” she explains.
It was important for Liz to find out what was going on. Her credit score could affect the interest rate a lender would give her, and might even affect whether or not they’d give her a loan in the first place.
WATCH: Find out how your credit score is calculated
Credit score education
After reading through the articles on the GetCreditScore website, Liz discovered there were a couple of things that were negatively affecting her credit score – both of which she attributes to ‘mismanagement’ on her behalf.
Firstly, bills. As any time-poor professional will testify that sometimes it’s easy for bills to slip by unnoticed.
“I always pay my bills, but there was a time when I was travelling a lot with work and occasionally I would forget to pay them until a day or two after the due date,” Liz explains.
Secondly, a credit card that Liz thought she’d cancelled five years ago was still open, due to it having a positive balance of just over a dollar.
“I’d requested for it to be closed and paid the payout fee, but it ended up being $1.10 in credit so they didn’t close it,” she says.
That credit had sat dormant for five years – and the only thing it did was negatively affect Liz’s credit score.
Small changes go a long way
Credit scores are made up of a number of factors, including your current credit limits and your repayment history. Both of those factors were significantly affecting Liz’s score.
“It was just mismanagement on my part,” Liz says. “It wasn’t like that was a true reflection of what my current credit situation was – it was just that I never really understood that that’s how the system worked.”
“I didn’t understand what would make the difference – you don’t know until you read about it and really learn about it. Only then can you make some small changes that really go a long way.”
Liz quickly closed her dormant credit card, making sure she received a letter of confirmation this time around. She then set up systems to ensure she was never a day or two late with bill payments again.
“I pay them in advance now, making a payment every fortnight,” she explains. “I know people will say you shouldn’t do that – that I’m missing out on interest and so on – but you don’t get much interest today anyway, and there’s nothing better than receiving a bill that you don’t owe any money on!”
Two years and three investment properties later…
Within four or five months of taking positive action, Liz had raised her credit score from 639 into the 900s. Then she went to talk to mortgage providers.
“I went back onto the website every month and could see the difference my actions were making,” she says. “Every little thing I did had an impact on my credit score.”
Two years and three investment properties later, Liz is delighted she spent a couple of minutes checking her numbers and learning about how credit scores are calculated.
“If I hadn’t, I might not have got the interest rates I did. Or the bank may not have even given me a mortgage,” she says. “Even a small increase in interest rate is significant over time – especially over three mortgages.”
By spending a few minutes checking her credit score and improving it, Liz altered the course of her financial life.
*Liz is a real GetCreditScore customer. Her last name has been omitted to protect her privacy.
If you’d like to know more about your credit score and how to improve it, visit GetCreditScore.com.au. Like Liz, you might discover some credit skeletons in the cupboard from which you can easily free yourself.
This article is brought to you in partnership with GetCreditScore.
Image posed by a model. Image: AdobeStock.