Taking Charge of Your Credit Score

The good, the bad and the ugly credit

Disclaimer- The advice provided here is intended to be general in nature and may not consider your individual financial circumstances. For personalized guidance, please schedule a consultation so that we can analyze your specific financial opportunities.

The factors influencing your credit score are pivotal to your financial well-being. A credit score is a tool utilised by lenders to assess your creditworthiness and capacity to repay loans. It plays a critical role in determining your eligibility for various credit products such as credit cards, personal loans, and mortgages, shaping your current and future borrowing prospects.

What can affect your score:

Timely repayment is paramount, as failing to meet credit obligations can substantially diminish your credit score. A single missed payment can reduce your score by 22%, while three or more missed payments within three months may lead to a 42% decrease. Although a 14-day grace period exists after the due date for rectifying missed payments, the repercussions can persist on your credit report for up to two years. Payments exceeding $150 that are over 60 days late might escalate to a default status, impacting your record for five years.

Buy Now, Pay Later and payday loans, While these services offer immediate access to goods with deferred payment options, neglecting payments can have repercussions akin to traditional credit obligations. Despite seemingly low fees and interest rates, mismanagement can lead to financial instability.

Timely payment of phone and electricity bills is essential, as delinquencies may impact your credit report. Automating bill payments can help maintain punctuality. Consider utilizing budgeting tools for financial organisation offers:

Frequent balance transfers can affect your credit history. Each application for a credit card with balance transfer features is recorded in your credit report. Instead of continual transfers, focus on repaying existing credit card balances for better financial management options:

Submitting numerous credit applications within a short period can lower your credit score. Each inquiry remains on your credit report for five years, signalling potential financial strain to lenders. Prudent financial practice involves spacing out credit applications to avoid negative implications.

The ratio of your credit card balances to the credit limits plays a significant role in determining your credit score. High credit utilization, especially above 30%, can negatively impact your score. Aim to keep your credit card balances low to demonstrate responsible credit management.

The length of time your credit accounts have been open is crucial. A longer credit history can positively influence your credit score, showcasing your experience in managing credit responsibly. Avoid closing old credit accounts, as it can shorten your credit history and potentially lower your score.

A diverse mix of credit accounts, such as credit cards, loans, and mortgages, can benefit your credit score. Lenders prefer to see that you can manage different types of credit responsibly. However, only apply for credit that you need to avoid unnecessary debt.

Regularly checking your credit report for errors or fraudulent activity is essential. You can access your credit report for free once a year from each major credit bureau. Monitoring your credit can help you identify any issues early and take steps to address them promptly.

By understanding these factors and actively managing your credit, you can work towards improving and maintaining a healthy credit score. Remember, a good credit score opens doors to better financial opportunities and favourable terms on credit products.

Book in today to see what your credit possibilities are.

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Caitlin