Once you know what you credit score is (click here to get your free credit score) and understand how your credit score measures up (Understanding your credit score) you may want to know how to improve you credit score.
Is your Credit Bureau information correct?
We first recommend that you makes sure the information held on you by the Credit Bureau is accurate. You can click here to get a free credit report from Centrix. Once you receive the report you should review it to make sure all the information is correct. If you spot something that isn’t right you should contact the bureau to have the information corrected. If something is not right it is a good idea to contact the other two credit bureaus in New Zealand (Illion and Equifax) to see if they have recorded the same incorrect information.
Sort out old unpaid defaults.
An old unpaid default from something that has you name on it (such as a power or telephone account) can significantly affect your credit score. If you have a default on your credit file getting this paid off should be your priority. Although the bureau will still have the default notified on your account, having paid it shows credit providers that you take responsibility for your liabilities.
Bring all credit accounts up to date.
Having a utility account (e.g. phone, power, water), bank overdraft, credit card or other debt that you have missed your monthly payment on will also reduce your credit score. The more month behind you are the lower your score will be. Your priority should be bringing these accounts up to date. Your next priority should be keeping these accounts up to date by making all your payments on time. If you have multiple credit accounts and you have paid these all on time over a period of time (say 12 months or more) this will improve your credit score and may outweigh any issues you have had in the past. This is by far the best way to improve a low credit score quickly.
Demonstrate you are responsible with credit.
Not having very much information on your credit report (thin account) can also lead to a lower credit score. This is because demonstrating that you can pay your liabilities on time is a strong positive feature in your credit score. While you certainly shouldn’t take on debt specifically to improve your credit score, having small overdrafts, credit cards, mobile phone accounts and other utilities which are always up to date will likely lead to a higher credit score.
Don’t have too much debt or apply for credit too often.
While different credit bureaus use different methodologies to work out your credit score having a large amount of liabilities and applying for credit often can negatively affect your credit score. You should ensure your liabilities are reasonable for your specific financial situation, and not show too much desperation by applying for credit too often. Note this does not mean you shouldn’t shop around to get the best deal you can.
Owning a house.
Finally owning a house is a strong predictor of creditworthiness and can help with a good credit score. Owning a house shows that you have managed you financial situation well enough to make a significant investment. Saving over time and if appropriate for you, buying a house, is a great way to maximize your credit score.