When you need to borrow money, having a good credit history is vital.
Maintaining a favourable credit rating is important when you need to borrow money and a new reporting system in Australia now makes it easier. Changes to the way lenders assess your credit score are underway with new laws imposed by the federal government that include positive credit reporting.
Comprehensive Credit Reporting (CCR), the new system that includes positive and negative financial behaviour is bound to be good news for borrowers and lenders as it will give the full picture of your financial standing, not just the negative stuff as it has in the past.
What does CCR means for borrowers?
Australia has been behind other countries when it comes to personal credit scores, which only let lenders see your negative money behaviours. That means if you’ve ever fallen behind on your mortgage or didn’t pay a phone bill, financial institutes and brokers were advised when running a credit check.
What they weren’t told about are all the times you did pay your bills on time. And that’s where the big change comes in.
For borrowers, this transparent method of tracing your financial history will mean more opportunity for loan approval. It may also offer opportunity for better rates on mortgages and other loans, including credit card limits.
And for lenders, CCR means getting an honest, broader insight into a borrower’s overall money history, which will lead to better, and fairer, client assessment.
How to maintain a positive credit score
Maintaining a clean and clear financial history is the best way to ensuring your loan application will be approved. Here’s a list of ways to keep your financial standing favourable.
- Firstly, you have to have a credit history to maintain. Lenders need a past to look at so be sure to have bills in your name. Start with a mobile phone plan, utilities bill or credit card.
- Don’t borrow more than you can re-pay
- Pay your bills on time
- Always pay your mortgage first
- Keep your credit card available balance higher than what is owed
- Keep credit cards to a minimum and use the one you’ve had the longest the most
- Spend less than you earn
- Save money for emergencies and hardships
- Talk to a broker to gain an understanding about your current credit score.