Credit scores are numerical ratings that reflect an individual’s creditworthiness based on their credit history. In Australia, credit scores range from 0 to 1200, and a higher score indicates a better credit history. Lenders use credit scores to evaluate a borrower’s ability to repay a loan, and a higher score often results in better interest rates and loan terms.
When you apply for a home loan refinance, lenders will typically request a copy of your credit report and credit score. This information is used to assess your ability to make loan payments and manage your finances responsibly. If you have a low credit score, lenders may consider you to be a high-risk borrower, which can result in higher interest rates and less favorable loan terms.
To improve your credit score, you can take several steps, including:
- Pay your bills on time: Late payments can have a significant negative impact on your credit score. Paying your bills on time, including credit cards, utility bills, and loans, can help you maintain a good credit score.
- Keep your credit card balances low: High credit card balances can impact your credit score negatively. It is recommended that you keep your credit card balances below 30% of your credit limit.
- Maintain a good credit history: The length of your credit history can have an impact on your credit score. It is important to maintain a good credit history by using credit responsibly and paying your bills on time.
- Monitor your credit report: Regularly monitoring your credit report can help you identify errors and take steps to correct them. It can also help you stay on top of your credit score and take steps to improve it.