Good financial habits for a good credit score

Good financial habits are worth their weight in gold - they can help you save, cut back on spending and live within your budget. But did you know that having good financial habits has a positive impact on your credit score?

It’s true - good financial habits mean a good credit score, which can play a big part in how much you can borrow.

But first…

What is a credit score and why is it important?

Your credit score is like an Uber rating for your finances that lets lenders know how likely you are to be a good borrower. When it comes to applying for a credit card, a personal loan or even a change in mobile phone provider, your credit score can literally make or break your chances of getting an application approved. 

Credit scores are affected by your current level of debt, credit card and loan repayment history and whether you’ve defaulted on any loans in the past. 

Find out more about credit scores and how you can check yours here. 

4 good financial habits for a good credit score

Since credit scores play such a big part in determining your borrowing power, it’s important to create good financial habits to improve or maintain a good credit score.

1. Pay credit card and loan payments on time

Missing a loan or credit card repayment will have an adverse impact on your credit score. Your repayment history for the past 24 months plays a part in determining your credit score so it definitely pays to stay ahead of the game and be organised with your repayments. 

2. Set up automatic payments and alerts

To help stay on track with repayments, set reminders or alerts for payment due dates on your phone and if you haven’t already done so, set up recurring payments to automatically pay your loan and credit card repayments on or before they’re due date. Setting up automatic payments is quick and easy to do. Find out how here.

3. Lower credit limit and pay debt down

Lenders look at the total amount of credit available to you, not just how much you’ve used, so the higher your total credit limit, the more debt, in theory, you could have in the future. Lowering your credit limit will also help keep spending in check. Be sure to make paying down your credit card and other debt a priority too. Rather than paying your minimum repayment amounts, consider increasing your regular repayments to pay down debt faster and give your credit score a boost.

4. Stay within your credit limit 

Along with how much credit you have, it’s important to keep an eye on how much of that credit you’re utilising. Make sure you aren’t regularly maxing out your credit cards - not a great look as far as your credit score goes. As a rule of thumb, only buy things when you’ve got the funds to pay for them up front. Credit cards can be super convenient and good for managing cash flow but if you’re spending money you don’t (or won’t) have anytime soon, it can be hard to break the debt cycle. 

How much could I borrow?

Use our borrowing power calculator to get an idea of how much you could borrow to buy your first home.

First home buyer? 

Book a call back with one of our Lending Specialists for expert guidance on finding the perfect home loan for your needs, explore some great home loan options here or use our home loan comparison tool to see which home loan could offer the best value for you.