Credit Score Improvement
How to improve your credit score before applying for a mortgage
In this guide
Why Your Credit Score Matters
A 100-point difference in your credit score could mean paying 0.5-1% more in interest, costing tens of thousands over your loan term. Improving your score before applying is one of the best investments you can make.
Understanding Credit Scores
Australian Credit Score Ranges
Impact on Your Mortgage
| Credit Score | Typical Rate Impact | Loan Options |
|---|---|---|
| Excellent (800+) | Best rates available | All options open |
| Very Good (700-799) | Competitive rates | Most options available |
| Good (625-699) | Standard rates | Good selection |
| Fair (550-624) | +0.5-1% higher | Limited options |
| Below Average (<550) | +1-2% or declined | Specialist lenders |
What Affects Your Score
Payment History
35% impactYour track record of paying bills and loans on time.
- Late payments stay on record for 2 years
- Defaults stay for 5 years
- Even small overdue amounts matter
Credit Utilization
30% impactHow much credit you use compared to your limits.
- Keep credit card balances below 30% of limit
- Lower is better for your score
- Applies to each card and total credit
Credit History Length
15% impactHow long you've had credit accounts.
- Keep old accounts open
- Average age of accounts matters
- New accounts lower average age
Credit Mix
10% impactVariety of credit types you manage.
- Credit cards, loans, mortgages
- Shows ability to manage different credit
- Don't open accounts just for mix
New Credit Inquiries
10% impactRecent applications for credit.
- Hard inquiries lower score temporarily
- Multiple inquiries in 14-45 days count as one
- Stay on record for 2 years
How to Check Your Score
Free Credit Score Services
Credit Reporting Bodies
- • Equifax
- • Experian
- • illion (formerly Dun & Bradstreet)
Free Score Providers
- • Credit Savvy
- • GetCreditScore
- • Finder Credit Score
Important Note
Checking your own credit score is a "soft inquiry" and doesn't affect your score. You can check as often as you like without penalty.
What to Look For
- Errors: Incorrect personal details or accounts
- Unknown accounts: Could indicate identity theft
- Old inquiries: Should drop off after 2 years
- Paid defaults: Should show as paid
- Duplicate listings: Same debt listed twice
Improvement Strategies
Quick Wins (1-3 months)
- Pay down credit cards: Get below 30% utilization
- Fix errors: Dispute incorrect information
- Set up automatic payments: Never miss due dates
- Pay off small debts: Clear any overdue amounts
- Update personal details: Ensure accuracy
Medium-term Strategies (3-6 months)
- Keep old accounts open: Maintain credit history length
- Limit new applications: Avoid unnecessary inquiries
- Pay more than minimum: Reduce overall debt faster
- Diversify credit types: If appropriate for your situation
- Monitor regularly: Track improvement progress
Long-term Habits (6+ months)
- Consistent payment history: Most important factor
- Low credit utilization: Keep it under 10% ideally
- Strategic credit use: Use cards but pay in full
- Build savings: Shows financial stability
- Regular monitoring: Catch issues early
Improvement Timeline
Typical Score Improvement
+10-30 points from paying down cards
+20-50 points with consistent payments
+40-80 points with good habits
+60-120 points possible
Remember: Score improvements vary by individual situation. Those starting with lower scores often see faster initial improvements.
Common Mistakes
1. Closing old credit cards
This reduces credit history length and available credit. Keep them open with small recurring charges.
2. Applying for multiple cards quickly
Each application creates a hard inquiry. Space applications out over time.
3. Maxing out cards then paying off
High utilization hurts score even if paid in full. Keep balances low throughout the month.
4. Ignoring small debts
Even small overdue amounts can become defaults. Pay everything on time.
5. Not checking for errors
1 in 5 credit reports contain errors. Check and dispute mistakes promptly.
6. Paying for credit repair
You can do everything credit repair companies do for free. Save your money.
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Action Plan
- 1 Check your credit score with all three bureaus today
- 2 Dispute any errors immediately
- 3 Pay down credit cards to below 30% utilization
- 4 Set up automatic payments for all bills
- 5 Wait 3-6 months before applying for mortgage
Disclaimer: This guide provides general information about credit scores. Individual circumstances vary. For specific advice about your credit situation, consult with a financial advisor or credit counselor.