Building a good credit score in NZ can provide opportunities when it comes to applying for essential needs like rent, phone plans, auto loans, and insurance. Aside from these, Kiwis can also take out loans for business, home construction, and other personal projects that have been put on hold. That’s why it’s important to be more mindful of your daily spending especially when utilising your credit line.
If you’re wondering how else you can improve your credit score fast, you’ve come to the right place. Here are five easy ways to earn an excellent rating on your credit history.
It pays to pay your bills on time. Not only does this free you from any interest, but you're also able to build a good credit rating that affects your future performance when applying for loans. This can be reviewed from your credit card bills, existing loans such as student or auto loans, phone bills, utilities, and rent.
Adjusting your credit limit can mean a lot of things. You can have an opportunity to spend more or utilise credit in case of an emergency. On top of that, increasing your credit limit lowers your credit utilisation rate by 30% or less, thus, improving your credit score.
For example, if you have an $8,000 card limit and spend $3,000 on your monthly billing, you'll have a rate of 37.5%. The lower your credit utilisation, the more you boost your credit rating. Ask your card issuer for qualifications and make a request to change your credit limit.
When you apply for a loan, your lender will typically look into how much you’ve used your credit line, as well as your utilisation ratio. The best credit scores have very low utilisation rates of only up to 30%, making them great candidates for future payments. This indicates that you have been managing your spending well and paying off debts on your card on time.
Some deem it smarter to close down a credit card account when unused — the less credit they have, the less expensive. However, closing them down affects the amount of credit you can utilise, which will likewise have an impact on your credit score. If in one account you have a $2,000 credit line and another with a $3,000 credit line, you have a total credit of $5,000. When you incur $1,000 in debt between the two accounts, you get a credit utilisation of 20%. So, if you close the card with the lower credit line, your credit decreases to $3,000, making your credit utilisation up to 33%, which is beyond the common score considered by most lenders.
Before deciding on getting rid of your inactive credit accounts, evaluate if you still have a need for them in the future. Keeping them open for a long time is a good strategy and will make it easier for you to take out a loan when you need it.
Every time you apply for a credit card, the provider will review your credit report and will note any other applications that you may have. Although having multiple credits can increase your overall limit, it will create a hard inquiry on your credit report, and may negatively affect your credit score that will remain for two years.
If you’re thinking of getting a credit application for any of your needs, you should look into a credit card provider that knows your needs and wants.
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