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How to ‘Fix’ a Bad Credit Score

Aug 4, 2022 | Finance Tips

If you’ve got a poor credit rating, it’s understandable that you’d arrive at a point where you wonder what you can be doing to turn your credit score around — particularly if your low score is standing in the way of getting a loan or credit card.
Wanting to repair your credit history is natural, and is a positive sign that you want to get your financial situation on track to recovery.
Keep reading to see what you can do today to build your credit score for the future.

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.

At Finance One...

We take your personal circumstances into consideration, not just what a credit reporting agency has to say about your past, which is why we can provide loans to Australians with bad credit.

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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.

Credit reporting agencies are required to allow consumers access to a free copy of their credit report once every three months. Credit reports are the best way to see where you’ve potentially gone wrong in the past to lead to your bad credit rating.

The biggest contributors to a low credit score

Negative listings with credit bureaus (also known as a credit agency) are some of the biggest influences to driving your score down. These include:

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

A credit check is conducted every time you apply for a credit product. Too many applications to obtain finance in a short period of time can make it appear to credit agencies that may not be responsible with your money, or living outside of your means.

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

Once you’ve got a hold of your free credit score report, take a good hard look to check for any errors that might be on there. Sometimes, a simple error from credit providers can cause your credit score to drop unexpectedly. The most common pieces of information that are wrongly reported include:
  • 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.

Top Tip

If you are unable to come to a satisfactory resolution, you do have the option to access free and independent dispute resolution by lodging a complaint with the Australian Financial Complaints Authority (AFCA).

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. 

Accessing car loans for bad credit through Finance One

 

At Finance One, we take your personal circumstances into consideration, not just what a credit reporting agency has to say about your past, which is why we can provide loans to Australians with bad credit.

Contact our professional team today to see if Finance One can help you, too.Apply Now

Disclaimer: The information above is of a general nature only and does not consider your personal objectives, financial situation or particular needs. You should consider seeking independent legal, financial, taxation or other advice to check how the information relates to your particular circumstances. We do not accept responsibility for any loss arising from the use of, or reliance on, the information.

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WRITTEN BY

WRITTEN BY

Makala Elliott

Makala is the Marketing Manager at Finance One. She has worked in the Finance and Lending industry for over 10 years, gathering a wealth of experience. She is passionate about helping Australians get back on track with their finances by passing on her knowledge.

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