How to Increase Credit Score

Do you know what your credit score is right now? This simple number can make the difference between getting approved for that home loan and facing rejection. Simply put, your credit score represents your creditworthiness to lenders - and the higher it is, the better your chances of approval. Here's the thing: improving your credit score doesn't have to be complicated.

Everyone misses a payment deadline occasionally. When this becomes a pattern, though, that's when your credit score starts to take a hit. Those larger payments - $150 or more that stay overdue for 60 days or longer - will stick around on your credit report for five whole years, even after you've paid them off.

But there's good news. You have the right to get any errors on your credit report fixed completely free. Even better, Australians can access both their credit score and full credit report at no cost. You're entitled to a free copy every 12 months, so checking annually is a smart move.

This guide will walk you through:

Why do credit scores drop in the first place
How to fix problems that are already there
Proven ways to build your score over time
Simple habits that keep your credit healthy for years to come

Ready to take control of your credit score?

Common Reasons for a Low Credit Score

What's actually dragging your credit score down? Several key factors can damage those important numbers, and understanding them is the first step to fixing the problem.

Missed or Late Payments

This one's the biggest credit score killer out there. When a payment runs more than 14 days late, it can show up on your credit report as a missed payment. The impact?

These late payments stick around on your credit report for two years. For more serious situations, payments of $150 or more that stay overdue for at least 60 days get listed as defaults - and those hang around for five years.

Too Many Credit Applications

Applying for multiple credit products in a short time sends red flags to lenders. Each application triggers what's called a "hard inquiry" on your credit report, and these stay visible for five years. Here's what makes this particularly important: according to Equifax, credit inquiries make up 51% of your credit score calculation.

Even small inquiries can reduce your score by about 5-10 points per application. This includes traditional loans and some Buy Now, Pay Later services, too.

High Credit Utilisation

Your credit utilisation ratio is the percentage of available credit you're actually using - and it has a major impact on your score.

Credit utilisation typically represents 20-30% of your credit score calculation. While the average credit utilisation in Australia sits around 28%, people with excellent scores usually keep their utilisation in the low single digits.

Lenders see high utilisation as a sign you might be financially overextended, making you appear riskier to them.

Errors in Your Credit Report

Credit report errors are surprisingly common. These range from simple things like misspelled names to serious problems like payments incorrectly marked as late or debts listed twice.

Even seemingly minor errors, like an incorrect address, can eventually cause major problems for your credit score. Spotting these mistakes early helps prevent bigger financial headaches down the track.

How to Fix Credit Score Issues

Found some errors dragging your credit score down? Here's how to take action and get your credit back on track.

Dispute Incorrect Listings

It's your legal right to get errors fixed - and it won't cost you a cent. Getting errors corrected on your credit report is completely free. Start by getting your free credit report copy, then check every detail carefully. Spotted something that doesn't look right? You can contact either the credit provider or the credit reporting body directly.

When you're disputing incorrect information, here's what you need to do:

Clearly identify the specific error
Explain why you believe it's incorrect
Include supporting documents if available
Keep copies of all correspondence

They must respond to your correction request within 30 days. If they agree the information is wrong, they have to fix it right away. They'll also notify anyone who received your report within the previous three months.

Work with Your Credit Provider

Going direct often gets faster results. Working directly with your credit provider usually works better than going through credit reporting agencies. Make sure you have all the relevant documents that support your case ready to present.

What happens if they don't respond within 30 days or refuse to correct legitimate errors? You can take the matter to their External Dispute Resolution (EDR) scheme.

Watch out for credit repair scams. Some companies will try to charge you fees to "fix" your credit report - don't fall for it. These services charge for things you can do yourself at no cost.

Use Financial Hardship Arrangements if Needed

Struggling to keep up with payments? Don't just stop paying - there's a better way.

Contact your lender immediately to discuss your options. Financial hardship arrangements can be a smart solution that protects your credit score while you get back on your feet.

Here's why hardship arrangements make sense:

Hardship information only stays on your report for 12 months
Missed payments stick around for two whole years
Credit reporting bodies can't include financial hardship information when calculating your credit score

These arrangements might include temporarily reducing or deferring your payments. During the arrangement period, your credit report will show on-time payments as long as you stick to the agreed terms. This approach helps you maintain your credit standing until your financial situation improves.

How to Improve Your Credit Score Over Time

Once you've tackled any immediate problems, it's time to focus on building habits that will strengthen your credit score for the long term.

Building a strong credit score is like maintaining good health - it requires consistent positive actions over time, but the results are worth it.

Make Consistent On-Time Payments

Your payment history is the single most important factor in your credit score calculation. Even one payment that's 30 days late can seriously damage your scores.

Here's what works:

Set up automatic payments through your bank. This ensures you never miss a deadline.
Use payment reminders as backup. Enable text alerts or calendar reminders for extra security.

The beauty of this approach? Once it's set up, it runs itself.

Reduce Your Outstanding Debt

Want to see improvements in 30-45 days? Focus on lowering your credit utilisation ratio. Credit card balances have the biggest impact here.

Three effective strategies:

Pay more than the minimum - Even an extra $50 per month makes a difference
Consider debt consolidation - One lower-interest loan can replace multiple high-interest debts
Request credit limit increases - Just don't increase your spending

Remember, keeping utilisation below 30% is good, but lower percentages mean higher scores.

Be Smart About New Credit Applications

Every credit application can drop your score by 5-10 points. The solution? Limit yourself to one or two credit inquiries every six months.

Before you apply:

Research products thoroughly to avoid rejections
If you're shopping for a specific loan type, submit all applications within a short timeframe - they'll often count as just one inquiry

Keep Your Old Accounts Active

Thinking about closing that old credit card? Hold on. Closing accounts can hurt both your credit utilisation ratio and credit history length. Longer credit histories get better treatment in scoring models.

For cards you don't use regularly:

Put one small recurring payment on them (like a streaming service)
Set up autopay to handle it automatically

This keeps your available credit high while showing responsible long-term management. If the card has a high annual fee, ask if you can switch to a no-fee version with the same provider instead.

The key to credit improvement? Patience and consistency. Small positive actions compound over time to create meaningful results.

Smart Credit Habits for the Future

Your credit score isn't something you fix once and forget about. Protecting your credit for years to come means developing the right habits now.

Here are four simple habits that make all the difference:

1. Check Your Credit Report Every Year

You're entitled to one free credit report every 12 months from each major credit bureau. Make this an annual routine - like getting a health checkup.

What to look for:

Your lenders are reporting your payment history correctly
Old negative information (like late payments or bankruptcies) has been removed when it should be
All personal details are accurate

Pro tip: Check reports from all three major bureaus - Equifax, Experian, and TransUnion - since information can vary between them. Right now, you can even get free weekly online credit reports.

2. Set Up Automatic Payments

Missing just one payment deadline can hurt your credit score. Automatic payments take the guesswork out of staying on track.

Most banks let you choose exactly how much to pay automatically:

Minimum amount due
Fixed dollar amount
Percentage of your balance
Full closing balance

The service is usually free, and you can change or cancel it anytime. Don't like autopay? Text alerts for payment due dates work as helpful backup reminders.

3. Use Credit Wisely

Keep your credit utilisation ratio below 30% - that's the percentage of available credit you're actually using. Multiple cards can help lower this ratio, but only keep as many as you can manage properly.

For unused cards with no annual fees: Consider putting one small recurring payment on them (like a monthly subscription) and setting up autopay. This keeps the account active without creating debt.

4. Build an Emergency Fund

An emergency fund protects you from those unexpected expenses that might otherwise force you to miss payments. Even a small buffer shows lenders you're financially responsible.

The goal: Build enough savings to cover your bills even during tough times. This single habit prevents so many credit problems before they start.

Remember: We're here to help you make smart financial decisions that protect your future. These habits work together to keep your credit healthy for years to come.

Your Credit Score Journey Starts Today

Building a strong credit score takes time and consistency - but every step you take makes a difference.

A strong credit score opens doors. From getting approved for that home loan to securing better interest rates, your credit score impacts so many financial opportunities. If you're currently dealing with a low score, don't worry - you can absolutely turn things around.

The path forward is clear. Start by checking your credit report annually to catch any errors that might be dragging your score down. Remember, disputing these mistakes costs nothing but can make a real difference. Focus on making every payment on time, keep your credit utilisation low, and avoid unnecessary credit applications.

Facing financial difficulties? Financial hardship arrangements can help you maintain your credit standing during tough times rather than letting missed payments damage your score for years to come.

Smart habits make all the difference. Set up automatic payments so you never miss a due date. Build up some emergency savings as your safety net. These simple steps prevent future credit problems before they start.

Think of improving your credit score like training for a marathon - it's not about quick fixes, but consistent effort over time. Small actions today lead to meaningful results down the track. Everyone deserves access to the best financial products available, and a strong credit score is your key to those opportunities.

Ready to take control of your credit score? Start with one simple step today - whether that's checking your credit report, setting up automatic payments, or disputing an error you've spotted. Your future self will thank you for taking action now.

If you still have questions about what might be effecting your credit score, please don't hesitate to contact our friendly team here at Mason Finance Group.

FAQs

Q1. How long does it take to see improvements in my credit score?

While some actions can impact your score within 30-45 days, significant improvements typically take several months of consistent positive behaviour. Focus on making on-time payments, reducing credit utilisation, and avoiding new credit applications for the best results.

Q2. What's the most effective way to raise my credit score quickly?

The fastest way to boost your credit score is to focus on making all payments on time, reducing your credit card balances, and disputing any errors on your credit report. These actions address the most heavily weighted factors in credit score calculations.

Q3. How does credit utilisation affect my credit score?

Credit utilisation, which is the percentage of your available credit that you're using, significantly impacts your score. Aim to keep your utilisation below 30%, with lower percentages generally resulting in higher scores. Reducing your balances or increasing your credit limits can improve this ratio.

Q4. Can checking my own credit report hurt my credit score?

No, checking your own credit report does not negatively impact your score. In fact, it's recommended to review your credit report annually to check for errors and monitor your progress. You're entitled to one free credit report every 12 months from each major credit bureau.

Q5. What should I do if I'm struggling to make payments due to financial hardship?

If you're facing financial difficulties, contact your lenders immediately to discuss hardship arrangements. These can include temporarily reducing or deferring payments. Hardship information stays on your report for only 12 months and cannot be used in credit score calculations, making it a better option than missing payments.