‘Credit score’ is a tool used by banks to determine your potential risk to the lender. It is purely automated and based on your credit file and information you have put in your application. There are some basics that you need to know when you are dealing with credit score. First, when a lender declines your application because you have a low credit score, it is advisable that you don’t then apply again for another loan with a different lender. The chances of being declined the second time are higher and if you get declined, your credit score will further go down further still.
Although there may be several reasons why one fails the credit score, some of the most common are poor credit history, missed or late payments, lack of genuine savings, and frequent changes in your employment or address. If you want to improve your credit score, make sure that you correct the problems that are affecting your credit rating. Some measures that you can take to improve your credit score are:
- Pay your debts on time
- Do not overdraw your credit card
- Pay the defaults in your credit file, if there’s any
- Stay in your current job and avoid changing address
- Show a good banking or savings history by making regular deposits
- Pay your utilities such as gas, electricity and phone on time
If you think that you will still score low on your credit rating, don’t worry because there are some lenders that will accept your situation more favourably. Although most major lenders in Australia require credit scoring, 3Carrots has access to some lenders who might consider your application regardless of your credit score. Not all lenders are the same. Some of them are more concerned with the stability of your income, while others may favour the one with the new job versus the one with ongoing defaults.