How to repair a bad credit rating
If financial struggles have left you defaulting on loans, missing repayments, entering into debt agreements or declaring bankruptcy, chances are your credit score is low. This reduces your chances of approval for a home loan, personal loan or credit card. But with some savvy planning you can start to rebuild your credit rating one step at a time. Here’s how.
1. Get a copy of your credit report
First things first, you need to get a full overview of your credit situation. You can access your credit report and credit score for free through websites like finder.com.au, giving you a clear understanding of what’s hurting your current rating. Also check for any discrepancies as well, because mistakes can happen.
2. Correct any mistakes
If you’ve unearthed mistakes on your file, it’s important you flag these issues with the relevant credit provider immediately. Perhaps you’ve been a victim of fraud or aren’t responsible for one of the debits. Whatever it is you need, work towards getting it reversed to eliminate further damage down the track.
3. Take control of your debt
There are numerous options to help you get out of debt, from debt consolidation loans to balance transfer credit cards. The key is finding what’s right for your current financial situation. It’s important to note that some options, like entering into debt agreements, will have an impact on your current credit rating, so always do your research before signing any contracts. One hack that can’t be faulted is good old-fashioned budgeting, reducing your expenses to put more money into debt repayments.
4. Keep ahead of repayments
Every time you make a debt repayment on schedule, your actions are recorded and fed into your credit file. The more positive actions you take, the better your score (and vice versa). So keeping ahead of your repayments and making sure you pay them on time can slowly start to improve your score, proving to the powers that be that you’re becoming more financially disciplined.
5. Steer clear of multiple credit applications
As tempting as a line of credit can be, it’s important to know that seeking multiple applications in short periods of time is recorded against your credit score, showing lenders that you’re in financial stress. Budgeting ahead of time and always having a contingency fund can help when an emergency strikes. If you’re really stuck, you may like to consider family or friends before making an official credit application.
6. Get expert advice
Seeking help from an independent financial advisor can really help you get on top of your finances and avoid falling into the same habits down the track. If that’s out of reach right now, try contacting the National Debt Helpline on 1800 007 007 to find free financial counseling in your area.