Tips to building a good credit history in Australia (and why you need it)
Secure your financial future now by following these easy steps.
Your credit history matters. Want a car loan? The lender's going to check your credit history. Ready to buy your first home? Showing you can pay your phone bill on time and not spend absolutely all of your salary each month will be crucial to getting that mortgage.
Your credit history is summed up in your credit score and you can check out your credit score for free here on Finder. Lenders often look at other sources of data too (we're living in an era of machine learning, after all).
The good news is that you are the master of your own credit history. Follow these tips and you'll be putting yourself in the best financial shape for the future. The earlier you start, the better off you'll be in the long run. Let's go!
Get a credit card and use it the right way
Using a credit card responsibly is one of the best ways to establish your credit history. And responsible use boils down to two simple rules:
- Ideally, pay off the balance owing in full each month.
- If you can't pay the whole balance off, make sure you're paying back more than the minimum required repayment each month and keep doing that until you've got the figure back down to zero.
Choose a credit card that lines up with your existing financial habits. If it's your first card, aim for a card with no annual fee, so you're keeping costs low.
Once you've established the habit of paying off the card in full each month, consider a rewards credit card so you get extra benefits from your spending.
Pay all your bills on time
Regularly paying bills late will make your credit history look less than credible, so make sure you pay everything on time.
To ensure you don't forget, set up automated payments or direct debits whenever possible. Added bonus: often there's a fee if you don't pay this way, so you'll be saving money as well.
If you know you won't be able to pay one bill on time in a particular month (it happens!), be proactive. Contact your provider and organise a payment plan. That way, you'll avoid a missed payment black mark on your record.
Set up a regular savings plan
Regularly saving money each month demonstrates that you're a responsible adult who knows how to handle their money. So if you haven't already got one, choose a high-interest savings account and start transferring money into it.
The best approach is to have an automatic transfer set up, so that your savings amount is transferred into the account as soon as your salary goes in each month. That way you're not tempted to spend it elsewhere. Most high-interest accounts only pay bonus interest if you don't make a withdrawal, so don't give in to the temptation to pull money from your savings for a splurge.
While your savings history won't directly affect your credit score, it's a key element of your financial history. If you want a large loan (for a house or car), showing that you've been able to regularly save will help.
If you are struggling with your personal finances, consider speaking to a professional financial counsellor by calling the National Debt Helpline on 1800 007 007.
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