The good news is there are a number of ways you can help fix your bad credit.
But the key is to start now.
As a quick recap, bad credit refers to negative listings on your credit report (such as defaults, missed payments and bankruptcy) which directly impact your credit score. This means if you have a bad (or poor) credit report you will also have a low (or poor) credit score.
Your first step to fix your bad credit is to obtain current copies of your credit report from each of the relevant credit reporting agencies and establish what listings have caused you to have bad credit. (Each credit reporting agency may hold different financial information about you so it’s worth checking each one.)
There are 4 agencies operating in Australia and they will provide you a free copy of your credit report once a year. They are:
Equifax: Website link – https://www.mycreditfile.com.au/products-services/my-credit-file – Phone – 13 83 32
Experian: Website link – http://www.experian.com.au/order-credit-report/ – Phone – 1300 783 684
Dun and Bradstreet: Website link – https://www.checkyourcredit.com.au/Personal – Phone 1300 734 806
Tasmanian Collections Service: (For Tasmanian residents only) – Website link –http://www.tascol.com.au/about-my-credit-file/ – Phone 03 6213 5555
Here are 5 of the most common listings to cause bad credit, and what you can do to improve them.
1. Unpaid Default:If you defaulted on a loan and avoided paying it back – it is referred to as a bad debt. You may still be able to contact the lender to resolve it, even years later.
By doing so, the lender may even accept a reduced amount. Paying it back will mean your credit report can be updated to show it has been settled, which is looked upon more favourably and will improve your credit.
2. Missed/Late Payments: If you’ve missed payments or have been overdue in paying them, these can be shown on your credit report and will work against you. They indicate you are either not good at managing money or are struggling with your repayments.
To improve, you need to make all your repayments on time and make sure no more are listed. If you are juggling a lot of debts you may want toconsider a debt consolidation loanso you can simplify the number of repayments you need to keep on top of.
3. Numerous Credit Enquiries: This is something that may surprise you. If you fill out lots of loan applications (even though you may not intend to go ahead with them) they will be listed as “credit enquiries” and will negatively affect your credit score and report.
To improve, please stop applying! If you really need a loan, you should do your research and contact the lender to discuss your credit report before you apply. They may even give you a time frame in which they will be willing to consider a new application.
4. You’ve declared Bankruptcy or have a part 9 agreement: If you entered into bankruptcy or a debt agreement, you should have been advised that this will remain on your credit report for up to 7 years and will impact many aspects of your life, including financial.
Every lender is different, but here at Fair Go Finance we are happy to consider a loan application as long as it has been a minimum of 12 months since your listing occurred.
Unfortunately there is no quick fix for these type of listings and you will need to wait until adequate time has passed.
5. Credit Cards: There’s nothing wrong with having a credit card or two, however you need to know that your credit card limits do affect your credit score and your ability to borrow money.
To improve your credit standing, reduce the limits on your credit cards and if possible, pay your credit card off in full, every month.
If so, you need to (and have the right to) get it corrected for free.
Errors can be made by either:
In Australia this will tend to be either Equifax, Experian or Dunn & Bradstreet and would be because of a mistake they’ve made when inputing the listings. Examples could be debts being listed twice, the wrong loan amount being listed or your personal details being incorrect.
To fix this, contact the agency directly. They will be able to correct the error straight away or confirm what needs to be done to rectify it.
If the agency did not make the mistake, the error could be caused by the lender or creditor you used. An example could be if a default was incorrectly listed against you.
To fix this, contact the creditor or lender directly. They will then need to contact the agency to have this corrected. If they refuse to help, you can contact their external resolution ombudsman to assist you.
By having an incorrect listing removed from your credit report will immediately improve your credit report.
**BE AWARE** Identity fraud happens every day. If you have a loan or credit entry you know nothing about, someone may have stolen your identity so you need to investigate and report it immediately.
If you currently have bad credit, remember that the only way you can improve it is by being responsible with all your expenses and debts starting now. This includes paying your bills, your rent and all other financial commitments on time.
If you ever get caught where you can’t make a payment, the best thing you can do is contact the lender or service provider straight away.
It is in the best interest of the lender or service provider to be helpful and provide you assistance if you are experiencing financial hardship. It will always be a win/win situation by choosing to work together because your credit standing can be protected, and the lender won’t be forced to enter into legal proceedings which are costly.