When buying a property for sale in West Melbourne, Parkville, South Wharf, or Flemington, it is essential to know your Experian credit score like the back of your hand. It is not the only credit score under your name, but it might be the one your prospective mortgage lender looks at to predict your likelihood of defaulting on your loan in the future.
Before March 2014, banks in Australia were not required to submit positive information to the credit bureaus, including Experian. This change is advantageous, for good financial behaviors can help you improve your creditworthiness fast.
Despite the introduction of positive data to credit reports, negative items are still severely damaging. Based on the company’s credit-scoring criteria, here are the things that Experian frowns upon:
Paying Less than the Minimum
Punctual payment has always been the ultimate behavior of a responsible consumer or credit user. However, timeliness means nothing when paired with inadequacy.
Each bill has a different minimum payment, but you are not always required to pay the full balance every month. If you fail to settle the least amount expected of you to pay on a particular date, it will be considered overdue.
One overdue might not suffice to knock enough points off your Experian credit score to move from one credit band down. However, several of them will surely hurt your credit.
Applying for New Credit Too Many Times
You can’t build your credit without using credit. And you can’t use credit without making an inquiry, which is technically a negative item on your credit file.
But then again, mortgage lenders generally do not care about properly spaced out inquiries. What concerns financial institutions, though, is frequent applications.
A high number of credit inquiries for a credit card or a loan will put you in a bad light. It can make you look hungry for debt as if you can’t get by without borrowing money. Creditors like consumers with a healthy appetite for debt, but they are allergic to desperate borrowers.
Taking Out a Payday Loan
Make no mistake about it. A payday loan can help build your credit if you repay it as agreed. However, conservative creditors encircle applications to lenders of last resort with a red pen.
Your dependence on payday loans can say a lot about your capacity to afford to a buy house (or the lack thereof), for you would not apply for them unless you are in financial distress. A single application might not drive your Experian credit score down that much, but do not take out one as much as possible.
Letting Unpaid Debts Get Sold to Collection Agencies
Missing a payment is wrong, but ignoring your financial obligation can damage your name in the eyes of Experian for a long time. If you are struggling to manage your bills, do not act like they no longer exist. They will follow you around and eventually resurface, mainly when your creditors sell your debts to collection agencies.
There is no definitive guide to Experian credit scoring best practices, but you can rely on common sense. After all, credit scoring algorithms can undergo many updates, but financial ethics hardly change over time.