When you apply for credit in Australia, your credit history is incredibly important. When you apply for a loan or a credit card, the lender will look at your credit file to assess your credit worthiness. Whether you are approved for the loan or credit card – and what interest rate you receive – will depend on what your credit file says about you.
Luckily, there are numerous ways you can build your credit, so that when you do apply for more credit, your credit file looks more appealing to lenders.
A car loan is a great way to build your credit. With a car loan, you will have a fixed repayment schedule over a certain period of time. As long as you make your repayments in full and on time, you can start to build your credit rating. And because car loans are usually secured against the car, they can be easier to get approved for than an unsecured loan.
A personal loan works in much the same way as a car loan, in that you have to repay the loan on agreed repayment schedule. A personal loan may attract fixed or variable rates of interest, and it may be secured or unsecured. A secured loan will usually be easier to get approved for as it is deemed lower risk by the lender. As with a car loan, you can use a personal loan to build your credit by always paying your repayments in full and on time.
Having a credit card and treating it responsibly is an excellent way to build your credit over time. Treating it responsibly means not going over your limit, not spending more than you can afford to pay back, and always paying off the balance in full at the end of each month. This will also help you to save on interest.
If you have little or poor credit, you may need to start off with a more expensive credit card (with higher interest rates), but as long as you pay it off at the end of the month, you can keep costs down and build your credit to a level that allows you to apply for a cheaper card.
Having a mobile phone contract is another easy way to build your credit. As long as you always make your required payments on time, you can use your phone contract to steadily build credit over time.