If your credit report has negative listings, such as missed bills/payments, defaults, part 1X or bankruptcy, these will affect your ability to obtain finance or credit.
So what can you do to get it back into order?
One of the fastest ways to repair your credit score is to pay all of your bills, loan repayments and credit facilities on-time and with 100% consistency. By doing this each and every month, your credit score will be positively readjusted. (But similarly, if you miss any payments, your score will then be negatively readjusted.)
But what if you’re looking for a new loan or credit facility right now, and can’t find a Bank or prime lender who is willing to approve you, because of your credit history? Is obtaining a bad credit loan a good idea to get you back on track?
This will ultimately depend on you, and how you repay the loan. Let’s look at two options, and see which one will help get your credit report back in order.
In this scenario, a bad credit loan will help improve your credit score (and get your credit report back on track). If you are not sure about the difference between your credit score and credit report, you may wish to read our blog, “What’s the difference between your credit history, credit file, credit report and credit score”.
As mentioned earlier, by taking out a loan and making all of your repayments on time, this will not only help improve your credit worthiness but will also give any future credit applications you make, a stronger chance of being approved.
Since Comprehensive Credit Reporting (CCR) was introduced in Australia, it has allowed positive repayment history to be shared between lenders who have implemented CCR (including ourselves at Fair Go Finance).
Previously Australia’s credit reports would only list negative events, such as defaults, but now with CCR, good credit (repayment) behaviour is also recorded. This means lenders have more information to assess you for a loan, and more accurately determine your risk profile and how likely you are to repay your loan.
If you have a lower risk, you are more likely to be offered better deals, which could mean lower interest rates or greater access to credit.
2. You take out a bad credit loan and show poor payment conduct
In this situation, your credit score (and credit report) will be negatively affected.
By missing payments or defaulting on the loan, lenders will view this bad repayment behaviour as high risk, and it will severely reduce the likelihood of you being able to obtain finance in the near future.
In summary, the ability to repair your credit report using a bad credit loan is definitely achievable, but it will be entirely up to you and how your manage your loan repayments.
We also recommend that you know your credit score and check your credit report at least once a year, to keep track of how good your credit worthiness is.
And finally, make sure you do your research and choose a responsible lender.
Here at Fair Go Finance, we are proud to stand out from our competitors because we will always act in your best interests. We’re here to provide quick, easy, online access to the personal finance you want, but we will never jeopardise your long-term financial wellbeing.