Good news about bad credit

Many Australians worry about their credit rating these days, especially if they know their own rating isn’t as good as it could be.

Finding out you have a poor credit history really can feel like bad news. It can restrict your access to a car loan, for example, or even a relatively modest credit card. It’s not a hopeless situation, though, because you can get to work on improving your rating right now.

You can repair your credit rating

While you can bring your credit rating up to a healthier level, it does take time and effort, but this is much better than labouring under the yoke of a poor credit history. Here are some of the steps you can take to bring your credit score up and make your life easier.

Obtain your credit report

You can’t make any moves to improve your credit history if you don’t know what’s actually on it. You can identify patterns of less–than–sensible financial behaviour, as well as any listings that are wrong or outdated. Just getting a few notes removed will help, but you can only do this if the listing is factually incorrect or should have been deleted a while ago. If you see that you’ve always paid your mobile bill a bit late and that this has chipped away at your reputation, then you know what to do from now on.

Concentrate on easily–cleared balances

If you can pay off some smaller balances completely then they’ll be removed from your file, which helps to bump you up the ratings. Don’t neglect the bigger balances, though, because they all count; just go for the low–hanging fruit if you can.

Compare debt consolidation loans from Australia’s major banks, credit unions and other lenders here.

Be diligent about your utilities

Your utility bills and your mobile phone account are also listed on your credit report, so make sure you always pay up promptly. Australia has a fairly new and comprehensive credit reporting system which records the good and the bad, so accentuate the positive.

Open a joint account with a significant other

If your spouse or partner has a stellar credit rating then you might be able to hop on one of their accounts, either a bank account or a credit card. This will improve your rating, but just make sure that you don’t damage theirs by going on a spending spree.

Remember that you’re not alone

You might feel some shame about your poor credit rating or financial history, but you’re not on your own. The proportion of Australian households experiencing over–indebtedness (a situation in which the amount of debt exceeds three years’ worth of disposable income) has risen from 21 per cent in 2004 to 29 per cent in 2016.

This situation means that not only are you not alone, but that there’s more help and advice out there for you. Don’t ever feel that you have to struggle on alone with your debt problems; even if you just find a debt counsellor to bounce ideas off, you’re taking the right steps.

You can still find financial products

Many lenders in Australia specialise in products for people with poor credit histories, as they need help and a chance to turn things around. There are, for example, credit cards and even home loans for people with bad credit.

What you need to do if you’re looking for bad credit car finance, or any other financial product and you have a poor rating, is to use a trustworthy comparison site to sort through your best options.

It’s important to use a well-established comparison tool in your circumstances because you need to know that the lender isn’t going to take advantage of you and that you’ll be paying fair interest rates.

Don’t apply blindly to bad credit products

Just because a lender specialises in poor credit products doesn’t mean that they approve everyone regardless of their exact circumstances. You’ll still be assessed properly and comprehensively so if you’re looking for bad credit car loans guaranteed approval isn’t something you can expect.

Be prepared for higher interest rates

Your credit score is a measure of how risky it is to lend you money. If a lender looks at your history and rating and sees that you’ll almost certainly pay every cent back on time, then you’ll get a preferential (as in low) interest rate. This is because you probably won’t cost any extra staff hours in reminder emails, calls and letters, or negotiating arrangements and using debt collection agencies.

If, on the other hand, your history suggests that you’re more likely than average to make payments late or miss them altogether, then the lender has to make any additional effort and expense worth its while. This means a higher–than–average interest rate.

Maintaining that credit card (with its rather modest limit) well for a year or two sends out a big message to the credit reference agencies and, in turn, to the mainstream lenders. It shows that you are capable of handling credit well, especially if your income has risen in the previous year or so.

Compare the rates, fees and features of Home Equity loans from Australia’s leading banks, credit unions and other lenders here.

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