How to improve your bad credit record

improve your bad credit record
How to improve your bad credit record

The fact that you have bad credit record does not mean that you will never be able to access credit facilities again.

You should not despair, but focus on improving your credit instead. Use this guide to get important information and tips on how to do it. You will learn how to access your credit report and keep it in perfect condition. You will also get a clear idea of the finance options available to you.

You should be well aware of what bad credit history is. When Australians are tempted to borrow more than they can afford to pay back, the risk of default on a loan or a credit card is much higher. Late and missed payments go on the credit record of consumers. As a result, these people they are less likely to get approved for personal loans and home loans by traditional lenders who run credit checks. 

The portion of the income of Australians which goes towards repaying debt is constantly growing. The other major chunk goes towards covering living expenses. With a growing amount of debt, people have less money to save. As a result, they are forced to borrow more money especially for the purchase of big ticket items such as cars. In general, loans and credit cards can be quite effective for managing your personal finances. However, you should use them in a disciplined way so that you do not stay indebted to creditors for the rest of your life. Find out how to repair your credit history and to manage credit more effectively.

Access your credit record

There are three credit reporting bodies in Australia. These are Veda, Experian and D&B. You are entitled to one free copy of your credit record every year. In order to obtain the free copy, you need to submit a set of documents to the respective credit reporting body. Usually, you can do this via mail, fax or email. You will have to wait for some time to obtain a report. If you prefer to use an express service, you will have to pay a fee.

Improve & maintain your credit record

You have to pay all of your bills on time. Since the processing of the transactions may take some time, it is best if you make the payments at least a few days before the due date. It pays off to prepare and use a schedule for paying the bills. You can also set up automatic payments.

You should avoid taking out new loans, credit cards or other credit products. It is best to stay away from other deals which involve financial liability such as cell phone contracts. This is important since getting new credit facilities can have an adverse effect on your credit history.

You should close all checking and credit line accounts which you are not using. This is because they can still have a negative impact on your credit record. You should also avoid opening an account in your name for another person to use. You would not want to risk getting into more trouble.

Once you pay off a loan or a credit card, you need to obtain a letter of settlement from the credit provider. In this way, you will have proof of the repayment to present to the credit reporting body in case the event has not been added to your record.

You have to ensure that your personal information contained on your credit record is always relevant and correct. If you move to a new house or you change your employment, you have to get the information on the record updated.

Home loans for people with bad credit

You can obtain a home loan even if you have bad credit history. The most important thing is to repay all existing debts which you have in full. Then you can use the services of a financial advisor who will help you with devising a strategy for restoring your creditworthiness and obtaining a loan.

You can also get a home loan with bad credit by placing a larger deposit. It is best if it is 30% of the price of the property or larger. As the lender will provide a smaller loan amount to you, the risk for them will be lower. Hence, you will have higher chances of getting approved. In any case, you should be able to explain your past delinquencies and what you have done to prevent future ones.

It is best if you talk to a loan officer or a mortgage broker in person before you make an application. You should support the application with references from your employer and other people who you have professional relationship with and who can verify your credibility. 

Rent-to-buy deals

This is a highly effective strategy for buying a home with bad credit record. You sign an agreement with the seller to live on the property and purchase it at a later date. You will have to pay an upfront fee and rent, but you will have sufficient time for repairing your credit so that you can obtain an affordable loan when the time for the purchase comes. Besides, a chunk of your rent will go towards building a deposit. You just have to ensure that the deal matches your income and future plans fully.

Personal loan for getting a home loan

You can take out one r more personal loans to pay a mortgage. This strategy can work out only with borrowing from loan sharks, however. In this case, the cost of borrowing and the regular payments will be very high and so will be the risk of default. That is why this strategy should be avoided. It is best for you to go for one of the other options even if it takes more time to produce results.

Popular & reliable direct lenders offering Bad credit loans

  1. Nifty Bad credit loan


    • Loans up to $5,000
    • Term up to 12 months
    • Interest from 21.24%
  2. Rapid Finance Bad credit loan

    Rapid Finance

    • Loans up to $30,000
    • Term up to 7 years
    • Interest from 12%
  3. ANZ Bad credit loan


    • Loans up to $50,000
    • Term up to 7 years
    • Interest from 12.45%
  4. Safe Financial Bad credit loan

    Safe Financial

    • Loans up to $5,000
    • Term up to 1 year
    • Interest from 8.7%