Advice on Improving My Credit Score?

LRapt0r30 on 18/04/2020 - 16:52
Last edited 18/04/2020 - 17:11

Looking for advice on improving my credit score as I will be in a position to look at a first home within the next 2 to 3 years.

What I would like to achieve:

I’m 20 and am working towards having enough for a down payment on my first home hopefully within the next 3 years. I recently performed a free credit check for the first time on creditsimple.com.au and discovered my rating was “Very good” at 768 out of 1000.
This score has been given just based on my internet bill as I have never taken a loan out or owned any credit cards and everything I purchase is paid in full including phones. What would be the best way to increase this sore going forward over the next 3 years?

My situation and Goals:

Currently living with Parents and paying board while saving and investing towards the goal of purchasing a house
This has allowed myself to save roughly 70% of my income with majority being invested in safe blue chip American Companies (I’m not gambling or attempting to “get rich quick”)
My main goal would be increasing my credit rating as much as possible hopefully to get better offers or better chance of getting a decent home loan in the future.
Would owning a $0 annual fee credit card such as The Qantas American Express Discovery Card, and paying the balance off early with the minimum limit prove that I can manage credit wisely?
Is there any other way of improving ones credit score?

Thank you :)

Financial

Comments

  • plmko on 18/04/2020 - 17:03
    +3

    It means nothing, relax.

    • Rapt0r30 on 18/04/2020 - 17:10

      Thanks, there is just so much conflicting information I wasn't sure what to do. its not too much of a concern at the moment just curious if there was any real tips on increasing it.

      • Halo375 on 18/04/2020 - 19:37
        +1

        Its more important to think of your income and your debt than to worry about a score. Any bank will be focused on your ability to repay the loan.

        • Rapt0r30 on 18/04/2020 - 19:52
          +1

          That's an excellent point! I have a ridiculously low weekly expense rate and I've been lowering it even further this year to boost my savings rate to about 70%

          • Halo375 on 18/04/2020 - 20:12
            +1

            @Rapt0r30: Then you’re on the right path, good luck!

  • John Kimble on 18/04/2020 - 17:03

    My main goal would be increasing my credit rating as much as possible hopefully to get better offers or lower interest rate home loans in the future.

    Does this even happen? I've never heard of an institution offering a lower interest rate because their credit score was high(er).

    Would owning a $0 annual fee credit card such as The Qantas American Express Discovery Card, and paying the balance off early with the minimum limit prove that I can manage credit wisely?
    Is there any other way of improving ones credit score?

    See https://www.canstar.com.au/credit-score/what-is-positive-cre…

    • Rapt0r30 on 18/04/2020 - 17:06

      I'm not 100% sure, I heard that loans can have better rates with a higher credit score although i don't have much knowledge with loans or home loans. Thanks for pointing this out I'll look into it.

  • Muzeeb on 18/04/2020 - 17:03

    Get electricity bill under your name and pay on time.

    • Rapt0r30 on 18/04/2020 - 17:07

      Thank you, I'll look into it

  • aussiepom on 18/04/2020 - 17:21
    +1

    You should be fine with a score like that but you might be better off registered with GetCreditScore. (Works directly off Equifax)

    I think the scale actually goes up to 1200 - but 768 is fine even if it does.

    The only real way to improve your score a bit is to get some more credit. In your situation, a credit card might be a good option. Get a fee free (or low fee) one and make sure you pay the balance off every month. .

    • Rapt0r30 on 18/04/2020 - 19:58

      I've decided to sign up to the Qantas American Express Discovery Card only due to the reason that Etoro the stock broker I use allows you to transfer funds with Paypal meaning i could link the credit card and just use it to deposit money every month into my stock account while earning points on the transactions then immediately transfer money to pay off the credit card. Its an extra step but i could rack up Qantas points for simply funding my investment account (I haven't tested it yet) but to would be awesome to get a free flight in a few years simply for doing nothing but investing!

  • El-Rhi on 18/04/2020 - 18:32

    Get a no fee credit card… you don’t even need to use it, but if you do then just make sure you at least pay the minimum each month. This way you get repayment history information on your credit file.

    Also, a credit bureau score is only one of many things banks look at when assessing loans. They often have internal credit scores which use different characteristics and there are other criteria you need to meet. And having a high credit bureau score doesn’t mean you’ll get a better deal. Most banks don’t do risk based pricing on credit score.

    • jimbobaus on 18/04/2020 - 20:31
      -4

      A credit score is not visible to the lender ever.
      They get a copy of your report and use internal systems to determine if they will approve you for credit.

      These scores are completely made up numbers used by the agencies to keep you engaged and checking monthly so they can on sell your information to lenders and they in turn can earn a commission if you sign up.

      • miwahni on 18/04/2020 - 23:19

        Sorry, what? I see people's credit scores daily. It gets fed into our "internal system" along with LVR and loan amount, employment type and region, to determine each customer's risk profile. And while it's not the sole determinant of loan approval, it certainly assists.

      • El-Rhi on 19/04/2020 - 10:15

        Credit score from a bureau (Equifax, illion and Experian) is absolutely visible to the lender… they are not ‘made up’ numbers.

  • Ughhh on 18/04/2020 - 19:07
    +1

    Would owning a $0 annual fee credit card such as The Qantas American Express Discovery Card, and paying the balance off early with the minimum limit prove that I can manage credit wisely?

    They (future lender) will most likely ask you to cancel the card. I know a lot of people who don't have credit cards and were still able to get a home loan. Just keep your main banks statements clean (ie. no Uber eats, gambling/casino related charges). Having a huge deposit is a pretty good indication of your savings ability. Also, a stable work history/income. The credit score isn't everything.

  • jimbobaus on 18/04/2020 - 20:29

    I guess it’s lucky that your “credit score” is a made up number that has absolutely no bearing on your ability to get credit. It’s a mechanism for the credit reporting agencies that run these sites to sell your information to lenders and get kick backs when you sign up for credit

    Lenders use their own criteria for lending and your “score” is not even visible to them when they access you file. They have conditions and requirements that you must meet and if you do then you will be able to get credit.

    People need to stop putting so much stock is these made up numbers and focus on being good with their finances and paying their bills on time etc.

    • Rapt0r30 on 18/04/2020 - 21:06
      +1

      Thanks for pointing that out, I'm always working towards lowering my expenses as much as possible and increasing my income so that shouldn't be a problem going forward. there is just so much conflicting information online

  • aaruu on 19/04/2020 - 21:15
    +1

    This is not an advice, only sharing from personal experience.

    It's a fact that credit transparency is only going to ever increase among Australian financial institutions. Credit score is definitely visible to lenders, anything above 700 is a good sign for credit assessor provided you haven't missed any payments be it your bills, credit cards etc. in the last 24 months (becoming more visible in credit files, these past payments history). But higher score the better.

    To increase score & increase your chances of lending approval:

    1) Pay ALL your bills be it mobile, utility etc. before/ on time for at least 24 months.
    2) Getting a $0 annual fee credit card & making payments before due date is very likely to help build your credit score. Keep the limit to bare minimum e.g. $1,000 if not confident yet with credit limits.
    3) Using your credit card every month and ensuring to pay in full before due date reflects good repayment discipline & also ensures you pay no interest on your transactions.
    4) Showing a regular saving pattern in your savings account helps big time. You'll need that for mortgage lending initial deposit anyway.
    5) Limit your expenses unnecessarily such as Foxtel, dining out, recreational activities. Banks count these all before making your affordability decision. Very intrusive checks in place & only ever going to increase. In saying that do enjoy life, but avoid waste of money & don't lose sight of the big picture.
    6) If you have a partner (or in future), joint lending helps in higher borrowing. But same above rules apply to your partner too, both need to have credible history.
    7) Regular & consistent income payslips or tax return amounts if self employed helps.
    8) Shop well for a lender, various lenders have different rules, strictness & keeps changing over time. Going via broker potentially better option than directly with bank, more options to compare & easily.
    9) Reduce the number of credit checks. Bare minimum ones are generally OK to prove credit worthiness such as for one for credit card, one for mobile etc. But frequent credit check will likely reduce the overall score. Some don't realise switching telecom companies (mobile plans on contracts) or utility companies can involve a credit check.
    10) Limit frequent employer changes. Consistent & continued employment has higher points in mortgage applications. But if an opportunity comes along with a higher pay & safer role, use common sense. Most lenders have variations in their backend mortgage score cards, do your bit, keep salaries coming & you'll be just fine.

    Sorry for the long reply, doing my selfless good deed of the day. You seem to be a switched on person who's thinking to plan ahead at the age of 20, well done & all the very best :)

    • Rapt0r30 on 19/04/2020 - 21:25

      Thank you a lot for the detailed reply, I will keep this in mind going forward and strive to achieve my goals. Might as well set myself up while i'm young instead of wasting money on fancy cars or pointless purchases :)

      • aaruu on 19/04/2020 - 23:52
        +1

        All the very best mate! On fancy cars, my weak spot, lol. In full honesty, I deferred all such hearty wishes until I bought my first home. I was lucky, had parents equity backing, bought my first home just before I turned 19. But I still kept on saving and bought my second & main home I currently live in at the age of 25. Sacrifices have had to be made, I didn't see many club/bars or countries (travel) until much later in life, but those were all worth it. No regrets, I am almost 15 years ahead in life (financially) than my peers, have 2 investment properties now, well settled career and a peaceful life. Depends on each individual's priorities. No one is right or wrong, just depends if the timing is right for your circumstances and life goals. Cheers & best wishes!

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