Enhancing your credit score is vital for a successful home loan application in New Zealand. Scores range from 0 to 1000, with 500 to 700 considered good. To improve it: pay off debts, limit credit applications, ensure timely bill payments, diversify credit types, and regularly check your credit report. Remember, it's a gradual process, but responsible credit behavior pays off.
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“My partner and I are looking to improve our credit scores in preparation for a home loan application later in the year. with the new CCCFA rules i want to get our credit profile and accounts in the best possible shape and would like to get advice. what are some good ways to go about improving credit score in the short to medium term? has anyone had any experience which they can share?*Last i checked, our credit scores are at around 750 on centrix – is it possible and/or useful to increase this?”
(Original question on Reddit)
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Improving your credit score is crucial when preparing for a home loan application in New Zealand. In New Zealand, credit scores generally range from 0 to 1000, and a good score is typically within the range of 500 to 700. Your credit score reflects your creditworthiness and the likelihood of repaying debts on time, with higher scores being more favourable to lenders.
Here are some tips to enhance your credit score in the short to medium term:
Pay Off Debts
Begin by addressing any outstanding debts. Aim to establish a consistent payment pattern if you’ve experienced difficulties in meeting your repayment obligations. Demonstrating a clear history of on-time payments over time can indicate improved credit behaviour.
Limit Credit Applications
Avoid making numerous credit applications in a short period. Frequent applications may signal to lenders that you could face challenges in repaying borrowed funds, potentially affecting your credit score.
Timely Bill Payments
Paying bills promptly when they are due is crucial for achieving and maintaining a good credit score. Conversely, missed payments or failure to settle outstanding debts may negatively impact your creditworthiness.
Diversify Credit Types
Having a good repayment history of a mix of credit types, such as credit cards and instalment loans, may positively influence your credit score. A well-rounded credit portfolio demonstrates responsible credit management.
Regularly Check Your Credit Report
It’s advisable to regularly review your credit report for inaccuracies and signs of identity theft. Correcting any errors promptly is essential for maintaining an accurate credit history.
Remember that improving your credit score is a gradual process, and positive changes may take some time to reflect on your score. However, by implementing these strategies and consistently practising responsible credit behaviour, you can work towards a stronger credit profile for your home loan application quicker.
Hope this helps.
Regards, Clive Fernandes (Financial Adviser)
Director – National Capital
Disclosure: I am the director of National Capital, a KiwiSaver advice firm. The information in this post is only general in nature and is not personalised financial advice. Please contact us if you want financial advice.
