Before you take out a home loan, there will always be a credit check involved. This check is to see whether you are a reliable person to loan money to. If you have a track record of making late payments or defaulting on loans, this could contribute to a poor credit score.

However, not all hope is lost. There are things you can do to improve your credit score and make sure you can borrow money when you want to purchase a home.

1. Check your current credit historyUnder Australian law you are allowed to request one free credit report each year. There are a number of services who can easily arrange this for you, like Veda Australia.
   When you receive your report you will be viewing the same information that your broker or bank receives. Understanding your current position is the first step. Read the report carefully to determine if you have a strong or poor credit score and what some of the contributing factors are.
2. Make credit card repayments on timeMissing credit card repayments can cause your credit score to go down. Missing payments mean you either don’t have the money to pay back money you have temporarily borrowed from the bank or you aren’t organised enough to pay on time. Either way, this is a big red flag for banks when it comes to lending you money to buy a home.
3. Close credit cards you don’t useWhile it can be helpful for people to have one credit card in their name, having too many can cause a few issues. Firstly, it makes it easy to forget about them (and paying them off). Secondly, it’s good to avoid the temptation of buying things you can’t afford to pay off, and therefore hurting your credit score.
4. Use different loan typesIf you’re able to successfully pay down different types of debts—like a car loan, a credit card, a mortgage— your credit score will improve. Think about using credit for very short-term expenses, like covering payment for a car for a few weeks until you save up enough to pay it off.

Use these tips wisely. Ultimately, building us a good credit score means avoiding missed payments and using credit products only when necessary.