Lending Association

Why your credit score matters and how to improve it

When you’re about to make a major financial decision, such as buying a new car or a house, securing a loan is often necessary. That’s where your credit score comes into play. Your credit score is a numerical representation of your creditworthiness, and it can significantly impact the loans you can access and the interest rates you’ll pay.

According to Illions most recent ‘Australia’s Credit Stress Barometer’ report, credit stress has continued to rise as a result of higher overdue repayments on consumer credit (credit cards, loans), overdue home loan repayments, more demand for consumptive credit, rising rent commitments and significantly reduced savings balances.

This underscores the importance of maintaining a healthy credit score to secure more favourable financial opportunities.

The importance of a good credit score

A good credit score serves as a direct reflection of an individual’s financial responsibility and trustworthiness. Lenders use your credit score to assess the risk associated with lending money, and a higher credit score indicates better creditworthiness. As a result, borrowers with good credit scores are more likely to qualify for loans and are often offered lower interest rates and more favourable terms. This means that maintaining a solid credit score can save borrowers significant amounts of money over the life of a loan.

A good credit score opens doors to various financial opportunities, including access to credit cards, mortgages, and personal loans, enabling individuals to make significant future purchases and investments.

To get a better understanding of your credit score, it’s crucial to check your credit report and take action if your score isn’t where it should be.

How credit scores are calculated

Understanding the factors that contribute to your credit score is the first step in improving it. The main factors include:

Payment history

This is the most critical factor. Any late payments or accounts in collections can harm your score.

Credit mix

Having a diverse mix of credit types demonstrates your ability to manage different types of credit.

New credit

Multiple credit inquiries in a short period may be seen as a red flag and a sign of financial difficulty.

Credit history length

The longer your credit history, the more data lenders have to assess your risk.

How to improve your credit score

Whether you’re planning to buy a home or secure a new car, a higher credit score can save you money and stress. Here are some tips to improve your credit score:

  • Pay bills on time: Set up reminders or automatic payments to ensure you never miss a due date.
  • Reduce credit card balances: If you struggle to make on-time payments, cut your limit back.
  • Limit new credit applications: Multiple credit inquiries can lower your score. Be selective when applying for new credit.
  • Diversify your credit mix: A mix of credit types, like credit cards, loans, and mortgages, can positively impact your score.
  • Maintain a long credit history: Keep older accounts open, as they demonstrate your creditworthiness over time.

Ready to take control of your financial future? These credit score tips are just the start to unlocking more opportunities and improve your chances of approval the next time you apply for a loan. Whether you’re looking to secure a mortgage, a personal loan, or just want to enhance your credit score, our experts at Lending Association are here to assist you every step of the way.


Any information provided herein is of a general nature only. No consideration has been taken into your objectives, needs or financial situation. Before acting on this information you should consider if it is appropriate for your situation.