Maintaining a healthy credit report is an important step towards financial health

Keeping your credit report healthy by being credit smart, will make you look better to the credit provider the next time you need to borrow money or buy something on credit.

Credit providers include lenders such as banks, credit unions and finance companies, and also businesses that sell you goods or services on credit, like phone, gas and electricity providers

Most Australian adults will look to borrow money or buy something on credit every so often. Whether it is a loan to buy your first (or your next!) home, a credit card with which to earn points or a new mobile phone on a post-paid contract, a credit provider will probably want to access your credit report to decide whether you’re creditworthy. 

Here’s our top 12 tips on being credit smart and keeping your credit report healthy:

1. Know what’s on your credit report.  You have a right to a FREE copy of your credit report every three months from each of the credit reporting bodies. Getting to know what’s on your credit report is the first step in taking control of it. Plus, it will let you see if there’s anything wrong on it.
2. Keep track of your credit score.  Your credit score is like a summary of what’s on your credit report and can give you a quick indication of how credit providers see you. Movements in your credit score will let you see whether your actions are helping to improve your credit report.

3. Fix anything wrong – not just default listings. For example, does your report show your surname as "MacKenzie", when it should be "McKenzie"? If your personal information is not correct, it might make it harder for a credit provider to find your credit report. At worst it may look like you're pretending to be someone else.
4. Look for unfamiliar activity. Don’t recognise a credit application that was made under your name? It may simply mean that a credit provider got its wires crossed when looking for someone else. But, it could also indicate that someone’s using your identity to rip off a credit provider. Either way, it’s worth investigating straight away. If you think someone may be impersonating you, you can also ask for a ‘block’ to be put on your credit report.
5. Fill out credit applications fully and consistently. Much of what’s on your credit report comes from you, when you fill out applications. The information that identifies you (e.g. name, address, birthdate and driver’s licence) is passed to the credit reporting body and put on your report. If you don’t fill out the application properly it can make it harder for credit providers to get a proper credit report about you and, at the extreme, can make you look a bit dodgy (e.g. if the credit provider sees that you use different variations on your name). 
6. Only borrow what you need. Having too much credit may make it harder for you to get credit for what you really need. If you think you might have too much credit open, try to close down any accounts that you don’t use. ASIC's MoneySmart website has more information about your right to financial hardship assistance.
7. Be smart with how you apply for credit. When you’re in the market to borrow money, or buy something on credit, it’s tempting to apply to a few credit providers just to see what you can get. However, this could make your credit report less healthy as those applications will be recorded on the report and other credit providers may get worried that you’re borrowing too much, even though you planned to actually only use one credit option. If you’re unsure if you’ll be approved, first get a copy of your report yourself. Secondly, talk to the potential credit providers before applying to get an understanding of whether or not you’re likely to fit within their approval guidelines. For example, if you’re applying for a credit card is there a minimum income amount that you need to earn to qualify? Does this include income that you get from casual jobs? By doing that you can avoid making applications to credit providers that are unlikely to approve you. If you’re looking for a home loan, you might benefit from talking to a mortgage broker who can guide you through the potential credit providers.
8. Be smart with what you apply for. The types of loans you’ve applied for previously may be looked at by credit providers. If they can see that you’ve taken out a home loan, this might make them see you as more stable and, as a result, more creditworthy. One or two credit card applications probably won’t raise alarm bells; however, a lot of credit card applications may make the credit provider think your spending could be getting a bit out of control. Likewise, credit providers may be a bit worried if they can see you’ve applied for a number of payday loans (as these small, high cost loans are often taken out by people who are struggling a bit financially). Of course, you won’t always have a choice in what types of credit you need (or can get), however its worth keeping in mind. MoneySmart has some great tips on using credit wisely (including potential alternatives to using payday loans).
9. Don’t let forgetfulness make you miss payments. Talk to your credit provider about setting up an automatic payment, i.e. direct debit, to make sure your minimum payments are paid on time. While forgetting one payment shouldn't impact your credit health too much, it can start to make you look worse to credit providers if you fall behind regularly.
10. Talk to your credit provider if you are struggling to make your payments. Many lenders (e.g. banks, credit unions and finance companies) and other businesses that sell things on credit (e.g. phone, gas and electricity companies) must work with you if you tell them that you are struggling with your payments. 
11. Keep your details up to date with your credit providers. They’ll send account statements or bills to the address (either your street address or email address) that they have on file. If you change your address without telling them, you might not know that you owe them money and it could end up as a default on your credit report.
12. Make arrangements when you go on holiday or away for work. If you’re going away for a long time, you don’t want to return to a headache of an unpaid bill that’s been listed as a default on your credit report. That default will stay there for 5 years, even if it’s paid.

    And a bonus tip… Check your credit report … It’s free! 

Having a healthy credit report is only one part of looking after your financial position. If you need help with other areas of your financial matters, such as with budgeting, use of credit, insurance or superannuation, check out ASIC's MoneySmart website.