Most Aussies have no idea about their credit score! Almost two-thirds of Aussies haven’t asked for a credit report, and one in 10 are reportedly avoiding this life maintenance task out of sheer terror! Mostly though, it’s more about complacency than fear. If you have paid your bills, overdrafts and loans off pretty responsibly the chances are that your credit report is pretty healthy and that banks and other lenders will see you as a good risk. What will your credit report actually feature? The good news is that credit reports have changed – for the better! If you haven’t looked at or thought about your credit report since before 2014 then you’ll be delighted to know that it doesn’t just feature the bad news. Order your credit report now and you’ll find that it includes the good bits as well, like the fact you’re prompt with your utility bills, credit card payments and any other loans or debts you have. It’ll also feature information like your credit limits on your cards, as well as the sorts of bank and store accounts you’ve held in the past and whether you’ve closed them, maintained them or had them closed for you. How can I get my credit report? In Australia you can get your credit report free from Equifax (formerly Veda), illion (formerly Dunn & Bradstreet) or Experian. What you should aim to have in your credit report What’s really useful in a credit report is evidence of lots of different types of accounts and credit rather than just a series of overdrafts, no matter how successfully you dealt with them. Good handling of credit cards, mortgages, rental agreements, insurance policies, phone bills and personal loans shows that you have a good grasp on finance and organisation. All of these factors are a huge help when it comes to applying for more, or entirely new, credit, including large and small personal loans. Your debts and bills must be well-managed, though In order to help your credit rating, you must be diligent with your financial commitments as much as you can. No-one is perfect, but if most of your payments are on time and you check your credit report frequently, you’re demonstrating that you can deal with money pretty well. If you’re about to apply for a personal loan, however, then you need to think about the negative consequences that it could have as well as the good. How personal loans can damage your credit rating Paying off your personal loan regularly and on time is good news for your credit rating. If you have a couple of late payments it’s not a disaster, but if you’re regularly missing repayments and you’re gathering late fees and arrears charges, then you’ll really hurt your score. If your payments are over $150 and they’re more than 60 days late, you may be deemed to be in default which is very bad news indeed. When you’re applying for loans or any other sort of credit, you need to weigh up the benefits of paying it off on time against the risk of not being able to make the occasional payment when it’s due. Don’t keep applying for loans Another important thing to remember, when it comes to applying for unsecured or secured personal loans, is that each application you’ve made in the last five years goes on your file. If you’ve been approved and handled the subsequent loan well, then your rating will probably be good enough to get some really great personal loan rates. If you tend to get your applications (or enquiries) rejected, then your rating will drop and you should avoid further applications until you identify the reason for rejection and take steps to rectify it. Paying off personal loans early doesn’t help You might think that paying off your personal loan earlier than you agreed looks good on your credit rating, but it doesn’t actually make any difference. You may have decided to bring some personal loan credit into your finances to show how well you deal with instalment credit over a longer period of time, so ending the agreement (even on a high note) defeats the object. The longer and more consistent your record of paying down your debts is, the better your score will be. Even if you have a sudden windfall, keep the loan agreement open so you keep on getting those gold stars each month (you don’t actually get gold stars from your bank manager, although you may get a Danish pastry at your annual financial review if you’re in the good books). Paying your loan off early does help you if you’re in trouble If you’re feeling overwhelmed by your loans or if your circumstances change, then paying your loan off early is more important than your credit rating. You should aim to make additional payments each month, or pay off a big chunk with a bonus or similar, just to reduce the balance and the interest you’ll ultimately pay. Ideally, to avoid taking on more debt than you can comfortably handle, you should make sure you’re looking for the best personal loans possible by using a personal loans comparison tool. These tools can help you to select a loan that suits you and gives you “wiggle room” for extra payments each month if you need to speed things up. Have a look at debt consolidation loans One big way a personal loan can really improve a flagging credit score is to consolidate your debts into one loan and pay it off. There are plenty of personal loans designed just for consolidating debts. You can pay off your credit card, store cards and other loans with one debt consolidation personal loan. Taking control of your various debts like this could really improve your score. Research and compare personal loans from all of Australia’s major banks, credit unions and other personal loan providers here. The information contained on this web site is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser. If you or someone you know is in financial stress, contact the National Debt Helpline on 1800 007 007.