A credit score is the figure in which lenders can determine how likely you are to pay off any money they potentially loan you. This number is calculated over time, based on how often you pay your bills on time. These bills can include your rent, mortgage payments, broadband and power bills, and paying off your credit card.
Whenever you make a payment successfully on time, this positively affects your credit score. On the other hand, if you make a default payment, or miss a payment, this is also noted on your credit history.
While you can still receive credit cards and personal loans with a poor credit score, you will have limited options. It’s likely the lender will charge you a higher interest rate to offset the risk that you pose to them. As a lender, they need to know you’ll pay them back.
However, the good news is that you can improve your credit score so that you can receive lower interest rates in the future.
So, How Can You Improve Your Credit Score?
1. Make Payments on Time
This may seem obvious, but this is one of the most effective ways to improve your credit score. Make sure your bills are successfully paid by their due date. An easy way to do this is to set up automatic payments so the payments go through on time and in the background, without you having to think about it. Having a record of consistent payments will help you improve your credit score.
2. Avoid Applying for More Finance
If you are trying to improve your credit score to apply for a loan, such as a home loan or personal loan, avoid applying for other finances. You don’t want to add another bill into the mix while you’re trying to improve your credit history. Avoid any new credit cards or personal finance until you have reached your credit score goals.
3. Pay Outstanding Debt
Do you have any outstanding loans or debt? It’s time to pay them off, if you want to improve your credit score. If they are outstanding, it’s likely you have left them for too long. Create steps to pay them off, such as adjusting your outgoings or expenses to free up some funds to pay them off. For example, instead of buying your daily coffee, put that money towards your outstanding debt. Your future self will thank you!
4. Max Out Credit Card
You don’t have to use the full limit of your credit card. If you are trying to improve your credit score, it’s a good idea to keep your credit card as low as possible. That way, it’ll be easier to pay off the balance in full each month and avoid incurring interest. You don’t want to be spending more than you can afford if you are trying to turn your credit score around.
5. Lower Expenses
You can make it easier to pay your bills on time and successfully by reducing your expenses. Did you know that you have more control over how much you pay for your utilities than you think? Jump on NZ Compare to take advantage of our range of user-friendly comparison platforms to compare broadband, power, mobile, and finances, to unlock better deals and savings that will make a true difference to your budget. Our comparison platforms are bias-free and free to use. You can compare various bills within just minutes, and switch to a deal that offers better value for money, so you can manage your budget better, and smash that credit score.
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