A credit score is a numerical expression of the creditworthiness of an individual. Lenders use a credit score to determine the likelihood an individual will repay their debts. A credit score is generated based on information sourced from a variety of credit reporting bureaus.
Whilst it is impossible to develop formulae to produce the best credit score, there are a few things that individuals can do to ensure that their credit score is as favourable as possible.
1. Minimise the number of credit enquiries on your file
When applying for lending, most people believe they need to shop around either to get the best deal or to increase their chances of successfully securing lending. However, this is a dangerous misconception as the more enquires you have on your file the less likely you are going to be in successfully securing lending. As lenders do not know whether the enquiries from other financiers were approvals, declines etc., the appearance of multiple enquiries on your credit file gives the impression that you are an unfavorable borrower who has trouble obtaining finance.
2. Reduce your debt liability
The greater your financial burdens appear to a financier the greater the negative impact it will have on your lending application. It is best practice to reduce and consolidate your personal debts and liabilities as much as possible before applying for more credit. This will prevent you from appearing financially stretched to lenders.
3. Pay your bills in a timely manner
Since the introduction of new government legislation which allows any service provider, who you owe over $150 to for a period of 60 days or more to place a default on your credit file. Paying your accounts on time has become of the utmost important to ensure that there are no unfavorable blemishes on your credit file as they can last for 5-7 years.
4. Monitor the enquiries on your credit file
It is important to be aware of the status of your credit file. Therefore, by periodically checking in on your credit file if there are any mistakes or marks on your file that should not be there, they can be investigated and rectified by contacting Veda.
5. Leave good old debt on your report
While negative items (such as debts paid after the due date) on your credit report can have unfavorable consequences whilst applying for lending. Good debt left on the credit file, which are accounts that have been paid but not closed with strong repayment records will give the impression that you are a strong borrower.