Best Way to Build Your Credit Score



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    What is the best way to build your credit score?

    The best way to build your credit score is to maximise your ‘positive’ credit activity and minimise your ‘negative’ credit activity.

    Before we explain what positive and negative activity looks like, we need to explain what a credit score is and why it’s so important:

    • Australia has three main ‘credit bureaus’ – Equifax, Experian and Illion
    • Their job is to collect and analyse information about people’s credit habits
    • Credit bureaus use this data to assess people’s ‘credit-worthiness’ – i.e. how likely they would be to repay a loan
    • They assign everyone a credit score – a rating that reflects their credit-worthiness
    • The higher your credit score, the more willing lenders are to do business with you

    So if you have a higher credit score, you’re more likely to be offered a car loan; and this loan is more likely to have a lower interest rate. If you have a lower credit score, you’ll find it harder to qualify for a loan; and, if you do, you may have to pay a higher interest rate.

    That’s why it’s so important to build your credit score.

    What is positive and negative credit activity?

    best way to build your credit score

    Positive credit activity is anything that shows you’re good at managing credit, such as paying bills on time and paying off loans.

    Negative credit activity is the opposite, such as falling behind on your bills or defaulting on loans. Making too many credit applications can also be seen as a negative activity.

    Under Australia’s ‘comprehensive credit reporting’ regime, Equifax, Experian and Illion will weigh up both your positive and negative credit activity when calculating your credit score.

    best way to build your credit score

    How do you build up your credit?

    The way to build up your credit is to maximise positive credit activity and minimise negative credit activity.

    Ideally, you should pay every bill on time and pay off all your loans. Every time you do so, you strengthen the case for Equifax, Experian and Illion to increase your credit score.

    Ideally, you should never fall behind on your bills or default on loans – because, every time you do, you give the credit bureaus a reason to lower your credit score.

    Steps to improve your credit score

    Here are 10 steps you can take to improve your credit score:

    • Pay your phone, internet and power bills on time (direct debits may help)
    • Notify providers when you change address (so the bills keep reaching you)
    • Build up your savings (so you have a buffer to pay emergency bills)
    • Pay your rent or mortgage on time
    • Pay your entire credit card bill each month (a balance transfer may help)
    • Reduce the limit on your credit card
    • Pay off personal loans, car loans and any other loans (debt consolidation may help)
    • Limit the number of credit applications you make
    • Order a free copy of your credit report and check it for inaccuracies
    • Call the National Debt Hotline on 1800 007 007 if you’re struggling with debt

    How quickly can you build your credit score?

    Unfortunately, it’s hard to quickly build your credit score. Generally, the process takes months or even years rather than days or weeks.

    Two of the fastest ways to build your credit score would be to pay off a debt (such as a car loan) or remove inaccurate negative listings from your credit report (such as another person’s debt that was falsely listed in your name).

    Generally, though, if you want to build your credit score, you need to look at it as a long-term process in which you keep doing positive credit acts.

    You can apply for a car loan with National Loans even if you have an adverse credit history. National Loans has a panel of 30-plus lenders, some of which work with borrowers who may have experienced credit problems in the past.


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