Building and improving your credit score 

Take control of your finances with practical tips to improve your credit score and build a positive credit history.

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Your credit score is more than just a number. Whether you’re buying a home, applying for a loan or getting a new phone contract, it affects your options. Your credit score will determine whether you can get credit and how much.

What is a credit score?

A credit score is a number provided by the credit bureau (TransUnion or Experian), that shows how well you manage your credit. It ranges from 0 – 743 for Experian and 0 – 999 for TransUnion. Financial institutions use this number to see how risky it is to lend you money.  It's based on things like how you pay bills, how much debt you have and your affordability.

The higher your score, the better your chances of getting credit (like a credit card, revolving facility, home loan or vehicle finance), while a lower score could mean that you're a high risk to lend to.

Experian credit score ranges and what they mean:

  • Very poor (less than 599): You may have trouble qualifying for credit products like loans or credit cards, and if you do, you’ll likely face higher fees and interest rates
  • Poor (599 – 615): You may qualify but with less favourable terms and higher interest rates
  • Average (616 – 633): You’ll likely qualify with reasonable fees and interest rates
  • Good credit (634 – 657): You may qualify for most credit offers and get good interest rates
  • Excellent (more than 657): You’ll likely get the best available offers, with the most favourable terms and interest rates

If you don’t have a credit history yet, your score will likely be below 100. To start building your score, consider opening a credit account.

Easily check your credit score on our app:

  1. Tap Explore, then Credit
  2. Tap Credit Health
  3. View your score and tips to boost it

Note: Checking your credit score on our app does not affect your credit score.

What affects your credit score?

Your credit score reflects your financial habits. Your credit score is affected by:

  • Payment history: If you're late or miss payments, it can hurt your score
  • How much credit you use: Aim to use less than 70% of your credit limit but use your accounts to keep them active and pay them on time. It can lower your score if you don’t
  • Overdue accounts: Missing or late payments can lower your credit score
  • Account history: Opening new accounts and not having much payment history can lower your credit score. Keep your accounts open for a while to show that you can pay on time
  • Few or no credit accounts: Different types of credit (like a credit card, home loan and vehicle finance) can improve your score. It proves to lenders that you can handle different kinds of credit responsibly
  • Different types of credit: Having a mix of credit (like a credit card, home loan, or vehicle finance) can improve your score by showing lenders you can manage credit responsibly
  • Credit enquiries: If you open lots of credit accounts or apply for too many credit products in a short time, your credit score might drop for a bit. When a lender reviews your credit report for a loan application this is called a hard check. Hard checks stay on your report for up to two years, but their effect on your score gets less over time

Remember, improving your credit score takes time. Practice good credit habits consistently to build a positive credit history and your score will gradually rise.

Tips for building positive credit history

There are 3 things you can do to so start building your credit history.

1. Start small

Open a low-limit credit card or take a small loan, like a personal loan or student loan. Pay the full amount due and on time to set a strong foundation for your credit history.

2. Use credit responsibly

How much credit you use compared to your credit limit, impacts your score. A low credit utilisation shows you’re managing credit responsibly and helps improve your score.

Using less than 70% of your credit limit is good. But for the best credit health, most financial experts recommend aiming for below 30% to improve your score over time.

3. Pay your accounts on time

Your payment history is the most important factor in your credit score. Missed payments can hurt your score. Set up automatic payments or reminders to stay on track and avoid late payment fees.

How loans can help improve your credit

Taking out a loan may seem like a step backwards if you’re trying to improve your credit score. But if managed correctly, it can help improve your credit.

Here’s how:

1. Consolidate debt with a personal loan

If you have several high-interest debts, consolidating them into one personal loan can help simplify your finances and potentially lower your monthly payments. This can reduce your credit utilisation and improve your score.

2. Build credit with a secured loan

If you’re new to credit or have a limited credit history, a secured loan can help. A secured loan is where you provide collateral (such as a savings account or property) to back the loan. Because the lender has collateral, they may be more willing to approve your loan. Making regular, on-time payments can help build a positive credit history.

3. Use credit responsibly

To improve your credit score, always pay your loan/s on time and in full. On-time payments will be reported to credit bureaus, boosting your score. Missed payments will hurt your score.

4. Home loans and credit score impact

A home loan is a big financial commitment. Paying on time shows your ability to manage large debts, which can help build a positive credit history and improve your credit score.

5. Borrow wisely

Loans can help build your credit score if used responsibly, but only borrow what you need and can afford. High interest rates or unmanageable debt will hurt your score.

The bottom line

Building and improving your credit score and credit history is easier than you think. It’s not about avoiding debt but being aware of what you borrow and how you manage it – it’s that simple.

 

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