Top habits of people with excellent credit reports

Top habits of people with excellent credit reports

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Loans are a necessary part of life for most of us, and having a good credit history is key to getting a loan application approved, like a mortgage or even a mobile phone contract. A healthy credit history could also put you in a good position to negotiate a better deal with creditors, like a lower interest rate. Imagine the thousands of dollars you could save over the life of your mortgage just by paying lower interest rates!

There are many ways to build a good credit history and boost your credit score. The following habits are consistent among people with an excellent credit history: 

1) They check their credit reports regularly

The first step towards building a good credit history is to know where you are at. You can get your credit report for free once a year directly from the credit reporting bodies, however it can take up to 10 days. Alternatively you can pay a fee and get it on the same day. You can also get your credit report for free and on the same day from Credit Repair Australia.

2) They dispute errors on their credit report

Your credit report will show identification information, such as your date of birth and address, all your credit accounts, your payment history and any defaults against your name. If you find out you have an unfair negative listing, such as a black mark, you have a legal right to dispute that information on your credit report. You can either do it yourself or contact an expert to completely repair your credit history. Removing black marks could be one of the quickest ways to make a significant improvement to your credit history.

3) They have a system to pay their bills on time

Lenders can see on your credit report if you pay your bills on time or late. Payments that are 60 days overdue may result in a default on your credit report, which is a big red flag to lenders.

Consistently paying your bills late could also lower your score because lenders may think that you can’t keep up with your financial commitments and you will struggle to repay a new loan.

It’s a good idea to have a system to make sure you always make on-time payments. You may choose to pay your bills as they come, set up direct debits or just add reminders on your phone to pay the bills when they are due. This way you could not only avoid potential black marks on your credit report, but also having to pay unnecessary late payment and processing fees.

4) They think twice before applying for new credit

You may be tempted to take a new credit card offer, or extend your credit limit in case of emergencies, like car repairs or medical expenses. However, having several credit cards with high limits could hurt your score – even if you never use some of those cards.

Most lenders look at the total credit limit and not the balance owing. If the total credit limit is high, lender may knock you back or lend you a lot less than you asked for, as they may consider that you are financially unfit to meet any additional repayments.

5) They don’t make too many credit enquiries

It’s ok to shop around for the best mortgage or personal loan and try to take advantage of special discounts or store offers. However, too many credit applications within a short period of time could have a negative impact on your credit report. When you apply for credit, you authorise lenders to check your credit history and these enquiries will show on your credit history for five years. Having too many enquiries within a short period of time may signal that you are struggling to make ends meet and that you are desperate for credit.

6) They have a budget and stick to it

Few Australians have a budget and keep track of their expenses, however if you monitor your income and track your spending, you are less likely to miss a payment or fall short when bills are due.

The easiest way to develop a budget and stick to it is to use an app to help you manage your expenses, or you can download one of the many budget spreadsheets available on the internet. Your goal should be to keep track of your spending and ensure that you can pay all your bills on time.

7) They monitor their debit and credit cards

By regularly checking your expenses, you will realise if you are spending more than you can afford. Importantly, if you spot any suspicious activity on your debit or credit cards, such as expenses that you didn’t incur, it could be a sign of identity theft. Someone else may be using your personal information for their financial gain, which could seriously hinder your ability to get finance in the future.

If you are concerned that you’ve been a victim of fraud, the first step is to get your free credit report and check for any discrepancies, including any loan or credit applications that were not initiated by you. 

Improving your credit score is unlikely to happen overnight, but after practicing good credit habits for some time, you should see a positive change in your credit report. Find out here what your credit report looks like, free of charge.

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