Maintaining a good credit history puts you in an advantageous position when applying for a loan. Lenders typically review a potential borrower’s credit history to assess their creditworthiness and see if they’re a responsible borrower. The better your credit history is; the better your chances of loan approval. It also improves your chances of getting low rates and flexible terms.
If you want to get a good deal on your car loan, it’s best to maintain a good credit history. Here are a few tips you should keep in mind when building a good credit history:
Review your credit report
This is one of the simplest ways to manage your credit history. Request a full credit report from a credit reporting agency. Review the report carefully and check for any discrepancies.
Check your credit report regularly so you’re always on top of your credit history and nothing slips through the cracks. According to the Office of the Australian Information Commissioner (OAIC), reporting bodies are required to give consumers their credit report for free once every three months.
Simple mistakes like a falsely recorded late payment could negatively impact your credit score. If you spot any errors, have them corrected immediately. Get in touch with your credit provider or credit reporting agency to have the mistake fixed.
Pay your bills and debts on time
Make timely payments on utility bills, loan repayments, and credit card bills to maintain a good credit history. Habitually missing payment due dates can hurt your credit history and lower your credit score by a few points.
Lenders could doubt your financial stability if you have a lot of missed payments on your credit history. They could see your late payments as being financially irresponsible and deny your car loan application.
For those who have a habit of missing payment due dates, try automating payment for bills and loans. Set automatic payments from your debit card so that you don’t miss any future payments.
Keep older credit cards active
Having a lengthy credit history, over three years at least, puts you in a good position. Keeping old credit cards can lengthen your credit age. If you have older credit cards that have good rates, think twice before cancelling them. It could be better for your credit history to maintain old credit cards than open new ones.
Avoid applying for multiple loans
Applying for multiple different loans back-to-back could raise alarm bells for lenders. They may see you as ‘credit hungry’ or desperate for funds but won’t have the ability to pay it back. Lenders are more wary of borrowers applying for many loans or lines of credit in a short span as it calls into question their creditworthiness.
When you apply for multiple loans, the lenders will push a hard enquiry on your credit. This reduces your credit score by a few points so be careful. Only apply for a new line of credit or loan when you really need it.
Looking for car finance options?
You don’t need to apply to multiple lenders to get the best deal. Aussie Car Loans' expert brokers will help you find the best car loan! We have an expansive network of lenders to ensure you get the most out of your car finance. Get a quote today!
If you don’t have the best credit history, we can help you get bad credit finance that meets your needs. Reach out by calling 1300 889 669.
FAQ
Why is credit history important?
Your credit history is important because it makes up part of your credit score. Lenders also use your credit history to judge your creditworthiness and assess the risk you pose as a borrower.
Can credit history affect loan approval?
Yes, your credit history can affect your chances of being approved for a loan. Lenders may be wary of providing you with a loan if your credit history is riddled with late payments.
What is a good credit history?
A good credit history is one without any records of late payments, defaults, bankruptcy, and the like. Maintaining a good credit history is important if you want to have a good credit score.
How long is a good credit history?
A credit history of seven years or longer is good. However, you could still get a loan with a credit history of at least two years.
If you don’t have any credit history at all, you could have trouble finding a good low-rate loan. In those instances, enlisting the help of finance brokers like Aussie Car Loans could help.
Can you get your credit history wiped?
Unless there’s incorrect information on your credit history, you won’t be able to wipe your credit history. It typically takes two to 10 years for negative information to be cleared from your record.
Where can I check my credit history?
You can request a credit report from Equifax, Experian, or illion. These credit reporting agencies can provide you with a full credit report with your credit history.
Can your credit history disappear?
Negative information on your credit history can disappear depending on severity. Small infractions or credit inquiries can be gone from your credit history after two years. Meanwhile, more serious information like bankruptcy, can stay on your record for 10 years.
How can I improve my credit history?
You can improve your credit history by practising good spending habits. Paying your bills on time, settling outstanding debt, and not applying for too many loans at once.
