In Australia, different credit reporting agencies judge credit scores using various criteria, with a higher credit rating being more favourable. The leading credit reporting agencies, Equifax and Experian, use different criteria to categorize clients’ credit scores. However, as of 1 July 2018, the law changed and affected how credit ratings are listed.
This change, known as Comprehensive Credit Reporting (CCR), has made it easier to include more detailed credit data on credit files to enable lenders to build a more accurate picture of borrowers’ finances.
CCR is a system which allows lenders to share more of your data with the leading credit reporting agencies in Australia. This information is updated on your credit file to give an up-to-date picture on your credit history, including any bankruptcies, or payment statuses.
Crucially, CCR also stipulates the types of credit you hold as well as whether you make any current or outstanding payments on time. The availability of both positive and negative data goes a long way towards informing the decisions of lenders.
What is a Bad Credit Rating?
A bad credit rating is a low score on your credit file held at any of the leading credit reporting agencies. This information shows how risky a borrower you are and is reflected as your credit score or credit rating.
So what is considered a poor credit rating? The following guide shows the various bands that the two major credit reporting agencies in Australia use:
How Do I Get a Bad Credit Rating?
Poor credit ratings reduce your approval chances when applying for a home loan, an unsecured loan, or a credit card. If you apply for a loan, defaults on loan repayments, enter into a debt repayment agreement or even applied for a credit card, you will have a note made onto your credit file at the credit reference e bureau.
These listings affect or lower your credit rating and impact how likely you are to get approved for a facility. Some of these include:
Failing to make a payment on an outstanding debt within 60 days of the due date, the creditor can begin proceedings to involve debt collectors and will report the outstanding debt to a credit reporting agency.
This payment default is then listed in your credit file and works to lower your credit score, and remains on the record for 5-7 years.
Late and Missed Payments
Any missed, or late payments are recorded on your credit file. They reflect negatively your ability or willingness to manage a line of credit and remain on credit files for two years.
Multiple Credit Enquiries
Making several credit enquiries in a short space of time indicates to potential lenders that you may be under financial stress. It negatively impacts credit scores and remains on file for five years.
Debt Repayment Agreements
A debt agreement is a legally binding agreement between you and your creditors. If you enter into one, your creditors agree to accept payment from you over a set period, which settles your debt.
Bankruptcy entails a declaration which shows that you are legally unable to repay debts. Bankruptcy lasts for three years. The listing in the file remains on record for at least five years.
Summons and Court Judgements
Failure to repay debt can result in a court summons or judgement. These are listed in your credit file and remain on record for five years.
What Do I Do If I Have a Poor Credit Rating?
If you have a poor credit rating, it isn’t the end of the world. You can repair your credit history with companies like Credit Solvers and improve the chances of getting any loan or credit applications approved.
There are some simple steps that you can take to improve your credit rating, and with that, the chances of getting approved on your loan or credit application:
- Avoid multiple credit applications in a short time, as this lowers your credit score
- Get a copy of your credit report for free to understand your finances including any listings that are hurting your rating
- Fix any incorrect listings, addresses, or mistakes in your report
- Stay on top of debt repayments and increase the real data used by the comprehensive credit reporting system, to make your credit file appear more favourable.
- Take control of your debt by using products such as balance transfer credit cards and debt consolidation loans
- Get expert advice. Contact the National Debt Helpline on 1800 007 007 or Credit Solvers for a free consultation
Contact Credit Solvers to Help Repair Your Credit
If you’re drowning in debt and struggling to get approved for loans due to a poor credit rating, get in touch with Credit Solvers today. Our expert team of financial advisers has many years of experience in credit repair.
We will study your credit history and sit down with you to guide you through your situation, as well as present all the available options. We can help you to get out of debt and look at alternatives to get any loan applications approved.
Call us on 1300 868 171 or contact us on our website to learn more.