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5 ways to get (and stay) in good credit health

You know about mental and physical health, but what about your credit health? If the only thing expanding in your bank account is what you owe on your credit card debt, read on.


Have you ever heard of a credit score, and did you know you probably already have one? Just like your waist-to-hip ratio can indicate your physical wellness, a credit score can point to how healthy you are with credit.

Your credit score is a rating of how reliable you are at paying your bills and debts. If you’ve ever applied for a loan or a credit card, even in-store credit, you’ll have a credit report and a credit score with a credit reporting agency such as Experian, Equifax and illion

Your credit report shows your track record on meeting your bills and repayments over the past two years. If you defaulted on a repayment or paid a bill over $150 more than 60 days late, that stays on your record for five years.

Your credit score is a number between 0 and 1,000 or 0 and 1,200 (depending on the agency) based on your credit report. A typical credit score is between 625 and 699. Less than about 500 is below average.

Having a low credit score can make it tougher for you to get finance, and if you do get it, you may have to pay a higher rate of interest. The higher your credit score, the more confident lenders are that you’ll repay money.

You can get a copy of your credit report for free every three months from Experian, Equifax and illion or just check your credit score with them.

Read more about credit scores on the government’s Moneysmart website.

1. Become a great payer to build your credit score

Paying bills on time is your easiest route to a great credit report and above-average credit score. To make that effortless, set up direct debits, automatic transfers, or put a reminder in your calendar a couple of days before a bill is due.

And remember you can try to ask a creditor for help before a due date lapses – if you’re a bit strapped for cash, contact the provider to request a payment extension. That way you hopefully avoid both the late payment record and late fees.

2. Set out a budget

Some people use a 50:30:20 rule to budget, which means 50 per cent of your take-home pay goes towards essential expenses; 30 per cent goes on discretionary spending; and 20 per cent is used for savings and paying off debt.

Whatever you decide in terms of your spending mix, setting out a budget is your most powerful exercise for getting credit healthy. Working out how much you need for essential expenses and how much can go towards savings or paying down debt is an important step towards stronger finances.

Health Professionals Bank has a free budget planner tool and useful tips on its website to help make budgeting easier. You’ll also find great information on the Moneysmart website.

3. Minimise your credit

Credit providers request to see your credit report every time you apply for credit or a loan, and that enquiry is listed on your credit report. A lot of enquiries in a short time can make lenders wary as it may indicate you’re in financial stress. So, only apply for credit if you need it.

Also avoid keeping hold of all the credit accounts you’ve ever had. When you apply for a loan, a lender looks at how much you’d have to repay each month if you maxed out all those accounts.

If you’re struggling financially, contact a free financial counselling service for help. There’s a list on the government’s Moneysmart website.

4. Match the life of a loan to the asset

A good rule is to match the life of a loan to the life of the item you’re paying for.

Short-term loans with higher interest rates, such as your credit card, should be used only for smaller purchases or bills you can pay off quickly.

A medium-term loan, such as a personal loan, is suitable for buying a car or consolidating debt that you can pay off over a number of years.

A long-term loan should be for an enduring item, such as a home.

5. Repair a bad credit score

If you find your credit score needs some TLC, you can get it in better shape by:

  • only spending what you have in the bank – use a debit card
  • making your debt more manageable with one lower-interest loan if you’ve incurred a lot of high-interest debts
  • avoiding too much interest and late fees by paying loans on time – and paying more than just the minimum where possible
  • reducing lines of credit as debt is paid off.

It’s also a good idea to check your credit report at least annually so you can correct any mistakes – for instance, a debt could be listed twice.

You can request your credit report from Experian, Equifax and illion

Health Professionals Bank | Bank differently

Find out more about how you can boost your financial wellbeing today.

This information is general in nature and does not take your personal objectives, financial circumstances or needs into account. Consider its appropriateness to these factors before acting on it.
Membership eligibility applies to join the Bank. Membership is open to citizens or permanent residents of Australia who are current or retired employees in the Australian health sector or are family members of members (i.e. shareholders) of the Bank. Health Professionals Bank is a division of Teachers Mutual Bank Limited ABN 30 087 650 459 AFSL/Australian Credit Licence 238981.

Paying bills on time is your easiest route to an above-average credit score.

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