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What To Do About Bad Credit & How You Can Improve Your Score

Unfortunately, some bad credit ratings stick around for a while. Did you know that a financial mistake that you made up to 7 years ago can still affect your credit rating today? Sounds like a long waiting game! But it doesn’t have to be! There are a few tricks to improve your credit rating.

If you don’t know your credit rating yet, there are multiple places where you can see it for free. It is advisable that you check in on your rating every now and then to make sure that the information is accurate. Sometimes, false information is affecting your credit rating for no reason. Need a fast loan?  Check out Nifty today.

Bad Credit

What is a credit score?

First of all, what is a credit score and how do you get one? Your credit score is a number that correlates to your previous financial history and the information in your credit report. Any electricity or gas accounts that were listed under your name and any mobile phone contracts that you ever had may contribute to your credit score. Any negative financial behaviour such as unpaid bills, missed payments, or any debt can have a negative impact on your credit rating. In July 2018, Australia introduced a new system called Comprehensive Credit Reporting (CCR). That means, your credit rating can also include positive behaviour like paying your bills on time.

What’s bad about bad credit?

If you are applying for a personal loan, your lender will have a close look at this information to decide whether you can borrow money or not. Your credit score may also impact how much money they are willing to lend you and which interest rate a lender can offer. A high credit score is indicating that you have paid your bills on time in the past, while a low credit score shows that you previously struggled to make your payments on time. In some cases, a lender might not be able to offer you a loan at all or will offer you a higher interest rate to compensate for the higher risk associated with your contract.

What to do to repair bad credit

It is best to prevent having bad credit in the first place. However, it may be already the case for you. There are a few things you can do to improve your credit rating. Note that improving your credit score won’t happen overnight.

Be careful: Hiring a credit repair company won’t guarantee a change in your credit score. They may charge you a lot of money for things you can do yourself for free.

Step one: Get your credit report

First of all, you should get a good overview of where your bad credit rating is coming from. Read your report thoroughly and make sure all information listed is actually correct.

Step two: Fix potential errors

In some cases, you may receive a bad credit rating caused by an error. Wrong information or common mistakes can affect your score, but luckily, they can be fixed for free. Your first action should always be to contact the provider that listed the information. If you need help dealing with a disagreement, you can contact the Australian Financial Complaints Authority (AFCA) or talk to a free financial counsellor.

Errors by your credit provider

In case your credit provider has reported incorrect information to the credit agency, you can contact them and ask them to change it. They will have to confirm that the listing is wrong and then ask the credit agency to change it in their reporting.

Possible mistakes could be:

  • Incorrectly listed an overdue payment.
  • You didn’t get notified about a payment that’s overdue.
  • Debt has been listed while you are in dispute about it.
  • An account was created by mistake which can happen with common names.
  • Someone stole your identity and a resulting debt was listed.
  • Errors by your credit agency

We’re all human and mistakes happen. If your credit agency made a mistake, you can easily get it removed by contacting them. They can either make the changes themselves or advise you on how to approach it best.

Common errors are for example:

    • Your credit agency made a mistake and listed a debt twice.
    • The amount of debt is listed incorrectly.
    • Your name, address or DoB is wrong or and needs updating.

Step three: Additional steps

There are a few small things you can do to improve your credit rating over time. For example, you can lower your credit card limit and repay it every month. If you can’t repay the full amount, make sure you pay more than the minimum requirement. Pay bills like utilities, rent, and mortgage on time. If you want to apply for a credit card or personal loan, limit the number of attempts you have for your application. Every one of them will be listed for 5 years.

Things that take time

Unfortunately, you won’t be able to fix any negative listings that are correct. You will have to wait until these listings get removed automatically.

To give you an idea: Any payments you have made (paid or not) will stay on your report for two years. Any payments that are more than $150 and have been overdue for more than 60 days will be deleted after 5 years. They stay on the report for this period, no matter if you have paid them or not. Your applications for credit cards, any sort of personal loan, mortgages and business loans will also be recorded for 5 years. Any overdue accounts listed as a serious credit infringement will be listed for 7 years.

Should I get another loan if I’ve got bad credit?

Yes and no. Surprisingly, managing multiple loans successfully can improve your credit rating, however having too many can be a bad thing for your score While it’s not advisable to get another loan if you previously struggled to repay a loan you are currently repaying, getting another loan could improve your rating long-term. If you do choose to get multiple loans, you should consider getting different types though. Combining a personal loan and a car loan, for example, shows that you have the ability to manage multiple repayments at once. And you could choose to combine them at a later point with a consolidation loan, that too, may improve your credit rating. But be careful that you don’t overdo it. Having too many loans at once is a red flag for future lenders that would see the risk of you missing a payment as too high. Taking loans from high risk providers can also negatively impact your score.

Are there loans for people with bad credit?

Do you feel haunted by your financial past? Don’t worry, modern lenders understand that your bad credit may be the result of long gone past decisions that don’t reflect your current financial behaviour. There are loan options for people with bad credit out there. You will probably have to accept an increased interest rate because your lender will see you as a higher risk customer. However, if you have accumulated debt from multiple sources that is hindering you from getting a loan, you could consider getting a debt consolidation loan first. The loan will be used to repay all your old debt and give you an easier overview of your current payments. Combining all payments into one will give you a better overview of your payments and may even improve your credit rating. There are many variables to consider before taking a consolidation loan, so you should always do your research and consider getting professional advice.

Nifty Loans and bad credit

When life goes south, we’ve got your back! While many lenders won’t consider your application if you have a bad credit score, we like to keep it fair. There is a personal story behind every bad credit score. Maybe a rough breakup left you with debt or you simply missed a payment. Whatever it is for you, mistakes happen. That’s why we offer loans for people with bad credit. We will perform a credit check, but that’s not all we look for. We want to know if a personal loan is affordable and suitable for your current financial situation. However, please note that a bad credit rating may affect the interest rate we can offer you.

We cater for a wide range of needs: No matter if you need to boost your personal finances before payday or if you are thinking about a big purchase, we’ve got a Nifty loan for everyone. Our online application works in three easy steps and will only take you a few minutes. Most people receive their outcome within 1 hour (if they apply during AEST business hours).

Check out our costs page, if you want to find out more about our Nifty loans and how they could help you.

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Andy Andy

AUTHORITATIVE SOURCE

Andrew Bell

Since founding Nifty in 2016, Bell has continued to make waves within the local financial sector for his continued ambition and willingness to adopt emerging technologies.

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