What to Do About Bad Credit?
Bad credit can seriously hamper your future plans. From getting a car to owning your first home, bad credit can prevent you from meeting your life goals.
Fortunately, just because you have bad credit now, that doesn’t mean you’ll have bad credit forever. There are firm steps that you can take to begin repairing your credit.
What is Bad Credit?
Nearly every Australian adult has a credit file, which contains a detailed record of your financial history. Lenders look at this file to determine the risk they’ll take when lending you money. If you’re not a risk, then they’ll be more likely to lend you money with low-interest rates. But if you are a risk, they’ll charge higher interest rates, and may not lend money to you at all.
Anyone with a credit score between 0 and 550 is considered weak or below-average. Events such as late payments, overdue accounts, bankruptcy, and even too many credit inquires can lower your score, earning you a bad credit designation.
How Can I Improve Bad Credit?
In short, you can improve your credit by showing lenders that you’re no longer a risk. To do that, you’ll need to fill your credit file with evidence of reliable borrowing.
You can create that evidence by taking these steps:
- Try Not to Borrow More Money – As much as you’re able, don’t make more credit card charges and avoid borrowing money until you can get into a stable situation. If you do borrow money, make sure that you do so strategically (more on that in a minute).
- Meet Current Obligations – The sooner that you can pay down current debts, the more your credit score will rise. Even if you can’t make a full payment, at least put something toward what you owe.
- Take Out a Small Loan – While this might seem counter-intuitive, a small loan can provide evidence that your situation has improved and that you are now more reliable. While the loan will likely be high interest, paying it back quickly will prove that you’re able to meet your obligations.
Still Have Questions?
No one wants to have bad credit, but it’s always possible to improve. We at Mortgage House are here to help, so contact us today!