Bad credit is something we often get asked about, and dealing with a poor credit history can be difficult, meaning it will take some time and effort to see your credit history looking good again, but it can be done. Thousands of people each year manage to repair their credit history, either with or without the help of a credit repair company. There are things you can do, and the main one is to put a plan in place, stick to it and remain optimistic.
To understand your credit situation, you need to know exactly how bad it is, and where the problem comes from. You can only really know when you have your credit report. Get one for free if you are willing to wait 10 days, or for a fee you can have one sooner. Veda, Dun & Bradstreet and Experian are the major credit reporting agencies in Australia.
Each credit agency has admitted that files can contain errors, and a study by consumer lobby group Choice confirmed in that a staggering 34% of credit files may contain an error or an inconsistency. This is why it’s important you see your credit file and understand everything on it.
When you have your credit report, go through all entries and make sure they all correspond to real debts that you have. Make sure there are no defaults recorded in error, and that paid debts or defaults show as paid. All of the personal details on the file also need to be accurate.
Fixing an error with your personal details should just be a matter of filling out a form. If you find an entry to dispute, make a note of it and take it up with the relevant company (not the reporting agency at first). Write to them via e-mail or phone them only when you have all the information you need. You can also use the services of a financial counsellor, or the Financial Ombudsman Service or Credit Ombudsman Service, if you encounter issues dealing with the company.
The easiest way you can do this is to spend as much as you sensibly can using your credit card, and ensure you pay off the balance each month. This could mean using your credit card for regular expenses, like groceries and petrol, then transferring the money straight across from your everyday account. The records of regular use of your credit card and regular repayments will be the clearest indication to potential lenders that you are capable of handling credit responsibly.
If you have credit card debt, then the best solution is to pay as much as you can on time each month to reduce the debt. You can often work out a payment plan with lenders too.
Any credit card you use should have a low interest rate, preferably with some interest free days to give you slightly longer to clear the balance. Remember that interest free days will only apply when you do not carry any balance on your credit card from the previous month though. See here for more information on how interest free days work.
While borrowing from the bank may be difficult, and pay day lenders should be out of the question due to the high interest and outrageous conditions they carry, you may be able to call on family and friends to provide a short term loan. They may even be helpful just to let you move in for a while until you can get a decent cash reserve together and repair your credit file.
Changes to the Privacy Act from March 2014 will also mean that the definition of bad credit could be more open to interpretation. Lenders will soon be able to see when you’ve been just a few days late making a payment, and exactly how many times you’ve been a late payer for the previous two years. That could mean that you end up paying a higher interest rate, or don’t qualify for the deals you want to qualify for If you haven’t been careful with your credit report and repayments.
Founder of Creditcard.com.au. Roland has extensive knowledge about credit cards in Australia. Known as a credit card expert, he has been featured on tv and in various publications. Some popular offers on our site right now include the ANZ Low Rate. This special offer has no annual fee first year, a low purchase rate and long 0% balance transfer. Have a look also at the huge 0% for 30 months balance transfer from Citi with no balance transfer fees.
Something you need to know about this card? Ask a our credit card expert a question.Ask a question