Tips to repair credit

 Are you thinking it's time now to buy your first home? Your credit history could affect your chances for loan approval, as well as the interest rates you might be offered on a mortgage.

Your credit score (or rating) is based on personal and financial information that is kept in your credit report. This information most likely comprises:

- the amount of money you have borrowed;
- the number of credit applications you've made (including store purchases, loans and credit cards, regardless of whether you have taken them up);
- whether you pay on time (this includes utility and phone bills, as well as repayments on cards or loans).

Lenders use your credit rating to decide whether to give credit or lend you money. Knowing this can help you negotiate better deals, or understand why a lender rejected you.

Here are some tips for making sure your credit history doesn't hold you back.

1. Check your record
The first step is to request your free credit report from an agency such as Experian or Equifax and see what's in it. The report generally shows payment histories, accounts opened, loan and card applications (successful, followed through or not) credit scores and other information lenders want to see.

2. Correct any errors
If you find there is something wrong with your credit report, contact the credit bureau that generated the report - as well as creditors listed on the accounts. Consumers should contact the credit reporting company either through a written letter or an online form describing what is incorrect about the report and provide evidence along with the dispute.

3. Keep accounts in good standing
Make sure all your bills and other accounts remain in good standing - that is, that they have no negative information associated with these credit obligations - by paying outstanding or due amounts on time.

4. Avoid applying for more credit
Making several applications for credit in a short period of time can give lenders the impression that you can't manage debt.

5. Use your credit card
It seems paradoxical, but using your credit card to pay household bills and expenses such as petrol then repaying it each month will improve your credit rating. Lenders will see that you can – and will – repay your debts.

For more information on your credit record and how to improve your score, see moneysmart.gov.au/managing-debt