Is it possible to fix bad credit?

There is a popular misconception out there that a bad credit rating can be repaired on the spot. While there is no hard and fast rule to ‘fixing’ your credit score, the good news is that there are steps you can take now, to kick off the credit repair process.

Understanding what’s affected your credit history

Not everything that happens in our life is totally within our control, but your credit history is a reflection of your past, so one of the first steps to helping turn your credit score around is to do what you can to avoid your financial history repeating itself. The best way to do this is to access your credit report and identify what’s caused your credit score to take a dive.

The biggest contributors to a low credit score

Credit Infringements such as a default listing

Defaults are effectively overdue debt. It might surprise you how quickly a default can be listed on your credit file; all it takes sometimes is to miss payments of $150 or more on utility bills for more than 60 days! Your payment history is now shown on your credit report for up to 2 years, so avoiding late payments as best you can, is one of the easiest ways to work towards a good credit score.

Court judgments, debt agreements or bankruptcy

A court judgment on your credit report indicates that you were not able to resolve your situation without legal action and may indicate to future lenders that you are a credit risk. Debt agreements and bankruptcy are also significant interventions that will stay on your credit report for up to a decade and are serious contributors to a bad credit rating.

Too many credit applications in a short period of time

Some people think that credit checks are only for credit cards, home loans or personal loans, but even a post-paid mobile phone contact, store cards, and buy-now-pay-later products are required to run a credit check when you apply for them.

Fixing errors on your credit report

• Where a default was listed while you were in the process of disputing it.
• An incorrect listing of a debt.  The overdue debt must be $150  or more and overdue for at least 60 days.
• A credit account being opened under your name mistakenly, or through an identity theft attempt.
• Failing to note on your credit file that you agreed to a payment plan or change in the contract terms.
• Reporting an unpaid debt that the provider of credit failed to notify you of.
• Holding inaccurate personal information such a misspellings in your name or your contact details.

All of these errors can be fixed by contacting the credit provider and requesting that they remove the incorrect listing. Legitimate errors are usually agreed upon and the credit provider is then responsible for contacting the appropriate credit reporting bodies to have it removed from your credit file.

Exercise caution around credit repair companies

The old adage that if something’s too good to be true, then it usually is, absolutely applies with most credit repair companies. Many Aussies believe a credit repair company’s claims that they can wave a magic wand and make their credit report sparkle. In reality, these companies hold no legal authority to make any changes on your credit file that you can’t do yourself (and some are known to charge through the nose for doing so).

Extra steps you can take to improve your creditworthiness with a credit provider

Credit scores are impacted by your existing credit limit, your repayment history, and how many times you apply to borrow money in a period of time. Some of the small actions you can take to help draw a line in the sand to boost your score and improve your creditworthiness with potential lenders are:

• Pay bills and loan repayments on time
• Refrain from applying for new credit if you’ve only recently applied for credit
• Fix up any unpaid bills
• Consider using the debt avalanche method, which is where you prioritize repaying your loan or other debt that has the highest interest rates first.
• Perform a debt consolidation. A debt consolidation is where you roll some, or all of your existing debt (such as credit card debt) into one loan. This not only helps your budget (paying one loan repayment is easier to keep on top than multiple loans with different due dates). Also, by consolidating your debts into one loan, you might be able pay off your debt with a lower interest rate, that what you’re paying across your combined debt.

Showcasing financial discipline and responsibility is undoubtedly a move in the right direction, particularly if you’ve felt financially stuck due to the weight of a bad credit rating. If you’re looking at borrowing funds but haven’t been able to achieve the level of credit repair you’d ideally like just yet, talk to a credit provider who will look past your past.