
Most lenders check credit scores when assessing applications for home loans or mortgage refinancing. If you have a good credit score, it becomes easier to access finance. If not, lenders may reject your application or charge higher interest rates if they do grant you a loan.
Defaults can remain on your credit history for 2-7 years, depending on the circumstances. You probably don’t want to wait that long to buy a home or refinance a home mortgage.
Is there a way to increase your credit score quickly? Well, it depends on various factors, such as:
- how low your score is
- how many negative listings are on your credit report
- the type of defaults listed
Suppose your credit score dropped because you fell behind on a payment. You could bring your score up quickly by squaring your arrears and then consistently paying that account on time. If, however, you have a court judgment, correcting the situation may take much longer.
With that in mind, there are things you can do to nudge your credit score up a few points quickly, and thereby qualify to get a home loan or refinance a home mortgage. Your credit score won’t magically go from red to green overnight, but with the right plan of attack, you could see an improvement in a much shorter time.
Here are four things you can do to improve your credit score faster.
1. Fix credit report errors
The first thing you should do is check your credit report to see what’s contributing to your poor credit rating. You can request a free credit report once every three months from one of Australia’s three credit agencies: Experian, Equifax, and illion.
Examine your credit report for the following:
- Listings you don’t recognize. If you spot something that should not be there, it could mean that you are a victim of identity fraud. In other words, someone else is accumulating credit under your name.
If this is the case, immediately place a ban on your credit report. This stops credit agencies from disclosing your credit status to credit providers until the ban is lifted. Next, ask the credit provider to conduct a fraud investigation and remove the fraudulent listing from your credit report.
- Incorrect or duplicate listings. If there are debts listed with the wrong amount, paid off, or duplicated, you can ask your credit provider or credit agency to remove them.
If the credit agency confirms the information is incorrect, they must correct your credit report within 30 days.
2. Increase your credit card repayments
One way to increase your credit score is by improving your credit utilization ratio. This is the amount you owe on credit cards compared to the credit limit.
Increasing your monthly payment or making extra payments in the month will lower your balance faster. The less you owe, the more your credit score improves.
Credit providers update credit reporting agencies monthly, so you should notice small improvements to your credit score every month.
3. Piggyback on someone else’s credit rating
Some credit accounts allow the primary user to add additional users, like a spouse or child. If a relative or friend has an account in good standing and is willing to add you as an authorized user, your credit score will benefit from their positive payment history.
This is called ‘credit piggybacking’, and it can help you boost your credit score.
4. Don’t open new credit accounts
Whenever you apply for credit, the credit provider reports it to the credit agencies. Even credit applications that are not approved are reported.
Credit agencies assess how responsible you are at managing your debt. Taking on more debt than you can comfortably service will negatively impact your credit score.
Avoid applying for new credit accounts, especially if your existing debt burden is high. This may mean delaying applying for a home loan until your credit score improves.
Seek help from an experienced Sydney mortgage broker
Building a good credit score takes time, but implementing these four credit score improvement strategies can help move the needle faster.
Consulting a knowledgeable mortgage broker can also be of great benefit. Mortgage brokers have relationships with a diverse range of lenders, some of who are more forgiving to applicants with credit impairments.