How to clear your credit record before applying for a bond
Your credit report is an indication of your financial behavior patterns and a detailed history of how you have handled credit in the past. It shows both positive and negative aspects of your financial history and health. When applying for credit, it is one of the most important aspects lenders will look at. Obviously, other aspects such as affordability are important but your credit report will, to a large extent, determine the interest rate you pay. When it comes to re paying a bond, even one percent can make a big difference.
A credit report gives a lengthy history of your credit responsibility and it cannot be dramatically improved overnight. It is in your best interests to keep it looking good at all times, particularly if you plan to buy a house.
There are a number of things you should do in order to maintain a good credit record.
- Study your report
The first step is to get an up to date copy of your report and understand it. Fortunately, you can get a free report from the various credit bureaus. You are entitled to one free report per year.
Request your latest report and read through it to see where it can be improved and what is looked at. Check if for errors or inaccurate data.
- Use credit
The irony of credit is that you need to have used credit in order to get more. It is all very well to have no debts and pay cash but this will not allow you to build a credit profile. Open a few small accounts and pay them diligently in order to establish a good payment history.
You can also get a credit card and pay the full balance every month. This is convenient and should also earn you points from the many loyalty programs available.
- Pay on time
This simple rule is the most important. Pay the full amount on all accounts when they are due. Do not miss payments or make them late as this will reflect badly on you. Even a few late payments will negatively affect your payment profile and your credit rating. Make sure you avoid defaults and judgments.
Don’t leave your credit record to the last minute and expect to get favorable interest rates on your bond. It is important to maintain a healthy credit record at all times as it takes a while to build.