Your credit score is vitally important for you and your financial health and wellbeing. Why? Because it is one of the key attributes lenders use to determine whether or not they’re going to offer you finance, and at what rate.
“Ultimately, it can make the difference between you getting the finance for your dream home or the loan to secure that new car you’ve always wanted – or, in reality, any form of finance for whatever you need,” says Jonathan Kim, Product Manager at GetCreditScore.com.au, a free service using Australia’s leading credit-scoring bureau Equifax.
There are a number of factors that affect your credit score (this credit burger explains it well). Some may sneak up on you without realising – so we asked Jonathan to shed light on the most common mistakes so you don’t have to make them yourself.
1. Making too many credit inquiries
It’s not just the credit cards, loans and other credit you actually take out that hit your credit score – every single enquiry you make is registered on there. So, if you’re in the market for a credit card or loan, for example, and you’re doing a bit of online research, don’t submit an application until you know for certain that’s the one you want to go for.
“Each application you make can impact your credit score,” Jonathan says.
WATCH: What makes up your credit score, and why do you need one? Post continues after video.
2. Applying to the wrong type of lender
You can tell a lot about a person by the company they keep, right? Well, it turns out you can also tell a lot about the person by the type of lender they’re applying to.
If you have multiple applications to payday lenders, for example, it sets alarm bells ringing for other lenders and can affect your credit credibility. Simply put, it suggests you might be in financial strife.
3. Forgetting to cancel unused facilities
Hands up who’s joined a gym full of good intentions, only to stop going a few months or even weeks later. It’s OK – you’re not alone! Just make sure you remember to keep the payments going if you’ve committed to a contract.
For example, it’s easy to change bank accounts and transfer important regular payments – mortgage or rent, gas and electricity – but don’t forget other payments you’ve committed to making too. Like gym membership.
“It’s easy to forget about something you’re not using, but if you do and you miss payments as a result, your credit report will know about it,” says Jonathan.
That’s why direct debits are always a good idea if you have an ongoing commitment, like the gym. Just make sure to cancel this if you’re cancelling that membership.
4. Not updating your address
Moving homes is a full-on admin task in its own right. From packing and unpacking to arranging removalists and changing utility providers, it takes some organisation to get it right.
Just don’t forget to change your address anywhere you have a financial relationship with – a bill that goes to the wrong address can easily impact your credit credibility if as a result the bill does not get paid. A mail redirection from the post office is also a good idea, as it can ensure you catch places that may have slipped your mind.
Old parking tickets can show up on your credit score if left unpaid, so make sure any government providers have your up-to-date details.
5. Missing a repayment
A more obvious one, maybe, but it’s worth underlining.
“Every missed payment can affect your credit score – even if it’s missed by just a day or two,” says Jonathan.
So, make sure you repay on time, every time, to avoid credit score pain. Set up automatic payments where possible – just remember to make sure you have the funds in there to cover them.
Remember, your credit score is a number between 0 and 1200 (a good score is usually 600 or above) that some lenders may use to determine whether or not they’re going to lend to you, and if so at what rate. The better your credit score, the better the credit you are likely to get. Find out your credit score for free by logging on to GetCreditScore.com.au – it’s safe, fast and easy.
This article is brought to you by Your Money & Your Life in partnership with GetCreditScore.