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How to tell if you have bad credit. And what caused it?

Written by Posted On Sunday, 08 April 2018 16:04

Bad credit can cause some difficulty in your life, especially when applying for finance and services. If you’re not sure what your credit rating is or how to check whether it’s good or bad, it’s quite easy (phew).

Every person has a credit file. This is what lenders will use to assess whether you’re suitable for a loan or credit card. Think of it like a finance CV, recording all the loans or credit cards you have applied for, taken out, paid off, or defaulted on.

The frustrating thing is, most of the time you don’t know what yours in until you need rely on it.

Bad credit rating – what is it?

Bad credit is notification that you are “risky” to lend to. It’s basically a reference which states that you have, at some point in your past, failed to keep up with finance payments. Loans, credit cards, phone accounts, utility bills all feed into your credit score. Multiple applications for credit can also bring your score down, especially if you apply for several things in a short space of time.

Then there’s the information such as bankruptcy or court judgements. All information which feeds into your credit file, potentially reducing your overall credit rating.

How do I know if mine is bad?

If you’re paying attention to your finances, you probably have an idea of whether yours is good or bad. We all know if we’ve missed payments or have big credit card balances. Signs to look out for are having credit applications turned down, sudden rises in your interest rates, or credit card issuers lowering your limit.

Thankfully it’s very easy to (and free) to check your credit score. There are a number of websites that can help. The three main government websites which you can order your credit rating from are:

-         Equifax Australia (formally Veda): Equifax.com.au

-         Experian: Experian.com.au

-         Dun & Broadsheet: checkyourcredit.com.au

You’ll need to provide identification information but It’s quite a quick and easy process to go through.

What causes bad credit?

There are a few things to look out for which can affect your score in a bad way. There are the obvious and serious infringements such as, court summons, court judgements, bankruptcy information, or overdue accounts listed as a serious credit infringement, will also appear on your credit file.

Then there’s the information that companies will look at when considering your application:

-         Payment history – All of your active repayments are recorded and if you’ve missed any or repaid any late, these could affect your score. If you are struggling to pay anything, it’s always best to call the lenders and let them know your situation, rather than just defaulting on payments. They may even be able to help you.

-         Credit enquiries – as a general rule of thumb, applying for credit once every three months shouldn’t affect your score.

-         Payment defaults / overdue accounts – Any amount over $150 that’s more than 60 days late, could be listed as a default. Even when marked as paid, a default can stay on your file for five years.

Then there’s the less obvious but just as important information:

-         High credit amounts – if you have a credit card with a high limit, it’s the limit which is listed, not how much you’ve use of it.

-         Multiple loans – only use credit where absolutely necessary. Lots of little loans can have a negative effect.

-         Regularly moving house or changing jobs

-         The age of your credit file - the longer you’ve have credit, the more

-         The type of loans you have - a secured car loan may be deemed less of a risk than a personal loan.

 

Article provided by Loans for People With bad Credit

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