If you suspect that your credit rating isn’t as good as it could be, or if you know for certain that it’s not very good at all, then you probably feel trapped and discouraged. You fear you won’t be able to get any credit cards with reasonable interest rates, or any at all if you really have dug yourself into a hole. The good news is that no matter how bad—and also how good—your credit rating is, you can always improve it. If your rating really is quite bad, you’ll be doing yourself a huge favour because home loans for people with bad credit can be tricky to arrange. If your rating is good already, then bringing it up even further can make life even easier. No matter what your motivation is, here’s six ways to improve your credit rating. Before you start you need to know what your rating actually is This might be the painful part, but it has to be done. You can get your report from a credit reporting body (CRB). In Australia there are three main credit report agencies that you can contact to get your credit report: Equifax (formerly Veda), illion (formerly Dunn & Bradstreet) Experian Your credit score or credit report is free unless you need it urgently, then you will be asked for a fee. Then you need to take a deep breath and look at where you’re going wrong and what you can do to improve your situation. These next six steps will most likely be the ones you’ll need to take if you want to turn your credit rating around. Make sure you pay your bills on time This is the most obvious solution, as well as one of the easiest if you budget sensibly. If you’re making as many of your monthly payments on time as possible, then you’ll be helping your rating quite a lot. Be consistent with utilities, your mobile phone bill and any subscription services. Prioritise bills over $150 because if you’re 60 or more days late with a payment of this size, then this can be recorded as a default on your credit report. Defaults are one of the worst things to appear on your report, so avoid these. If you know you’ll have difficulty with a bill of this size, pay as much as you can and talk to the provider before the due date, not after. Don’t apply for any new credit It doesn’t matter whether you get approved for the credit or not. If you’re rejected then this will show up as an inquiry on your credit report and the fact that you were turned down will hit your rating. If you are accepted, other lenders or the CRBs won’t be impressed with the fact that you applied for more credit despite already being in rapidly-warming water. This will probably lead to, you guessed it, some points being knocked off your rating. The only circumstances in which you should be thinking about other credit cards or personal loans for bad credit is to consolidate several debts and make them more manageable. You might need need professional debt advice. Concentrate on your outstanding balances These outstanding loans, overdrafts and credit cards, as well as utility arrears, will continue to drag your rating down for as long as they’re around. Having them hanging around is costing you extra in interest and it also makes it harder to prioritise your payments. One idea is to “attack” the debt that has the highest interest rate to bring it down that little bit faster. Leave your credit card alone for a while Your credit limit is a limit, not a target! Keeping the balance on it as low as possible is a good way to bump up your rating. This is where those balance transfers come in handy; if you could transfer your balance to a card with a lower interest rate, or even one with 0% interest for a while, you can really make some headway. Use that lower rate, or the interest-free months, to bring that balance down as much as you can. Always monitor your debt-to-credit ratio This ratio is essentially how much of your credit amount you use or how much you’ve used at any one time. If you have a $1,000 limit on a card and you always seem to have a balance of around $200 on it, it’s a 20% ratio. This is OK, but by applying for a higher limit, say $2,000, you’ll have a ratio of just 10%. This doesn’t mean you can start to spend $400 on a regular basis, though! The aim is to keep your ratio low and keep making your payments. If you need something like a car loan, bad credit ratings needn’t stop you, but you should aim for a separate loan rather than paying for the vehicle on your credit card. Look after your “safe” accounts well If you’ve managed to maintain a few bills well, without missing payments, make sure these accounts stay healthy as the good reports from them will boost your rating. For example, if you always pay for one batch of groceries on your credit card and then settle the balance the following week, keep on doing that. This shows that you can dip into your credit and then repay it responsibly. Bonus tip – diversify your credit While common sense says that the more debt you have, the worse off you might be, having several different types of debt is good for you and your rating. If you’re looking for home loans with bad credit, then demonstrating that you’ve recently been able to manage a car loan, an overdraft, a credit card and your utility bills will stand you in good stead. If you’re up to capacity with two or three types of debt, though, don’t add in a third or fourth until you can actively manage it. Rebuilding your credit rating takes time and rushing can be counterproductive. Compare personal loans for debt consolidation purposes at InfoChoice. 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.