Apr 11, 2022 6:56:39 PM

Fix Your Credit Score in 5 Simple Steps

Topics: Financial Health, First Home Buyer, Home Loans 0

When it comes to credit scores, the general rule is the better your credit score, the better your chances of success with credit applications. That’s why it’s so important to regularly track your credit score and fix anything that could negatively impact it – such as late payments, defaults, or errors on your credit report. And if you do find yourself with a poor credit score, there are ways to fix it. Here are five simple steps to follow.

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But first, how credit scores work

In New Zealand, there are four credit reporting bureaus that track both positive and negative credit history. Any time you apply for credit – a personal loan, car loan or credit card, even your electricity or home phone account – that information is stored in your credit report. Missed or late repayments lower your credit score, whereas paying on time and in full improves your credit score.

Step 1: Know your credit score

The logical first step is knowing what your credit score is so you have a clear idea of what’s helping improve it and what’s hurting it. It’s a good idea to check your credit score at least once a year and before you apply for any major credit. You can request a free copy of your credit report at any time by visiting one of the following websites:

Equifax

Illion

Centrix

Credit Simple

Step 2: Report any errors

For any errors you find on your credit report – such as a default you didn’t incur or a credit purchase you didn’t make – contact the credit reporting bureau or the lender that reported it. They will then investigate the error, come back to you with an outcome, and remove the negative incident if it’s found to be an error.

Step 3: Get back on track

Your credit report helps lenders decide whether or not to lend to you again. It provides a big picture look at your spending and repayment habits, and helps them predict how you will likely manage repayments in the future. Your credit score can also influence what interest rate you’re offered, and that could mean you miss out on the most attractive interest rates if your credit score isn’t what it should be. 

So if you have missed repayments or made late repayments in the past, it’s essential you get back on track again, right way. Schedule your repayments on time, pay more than the minimum balance if you can, and consider a debt consolidation loan if you need help consolidating all of your debt into one manageable loan repayment.

Step 4: Pay on time and in full

Once you’ve cleared up any errors and taken further steps to get back on track again and minimize any more damage to your credit score, you can start building your credit score back up again.

The best way to do that is to pay your bills on time and to clear your debt in full. So set up direct debits and automatic payments to ensure you don’t miss a repayment by mistake.

Step 5: Apply for credit

Another way to help build your credit history -and prove to lenders that you are responsible and able to manage your repayments – is to only apply for credit you need and consistently manage a healthy level of debt. 

That means avoiding debt that could lower your score – like quick cash loans, pay day loans or high interest credit cards – and applying for credit that actually boosts your credit score – such as home loans, personal loans or car loans.

Start today

There’s no better time than right now to start fixing your credit score. For more information about credit scores and how they impact your ability to borrow, take a look at the Consumer Protection website.

Contact a Mortgage Express branded mortgage adviser if you need help accessing home loan finance, but you’re concerned about your level of debt and credit score. Our team of advisers can work with you to help you plan your financial future.