What Does It Mean To Have ‘Bad Credit’?

So what exactly is bad credit? Well there are a few different kinds of bad credit, and all of them will have you struggling like you’re trying to put on a pair of jeans straight out of the shower when it comes to borrowing money in Australia. Think of it like Santa’s naughty list, if you are good eventually you’ll stop getting coal in your Christmas stocking. 

1. Default or Overdue Account:
   A record of this will appear on your Credit File when you are 60 days or more in arrears in paying your account, and the pesky thing will remain there for 5 years from the date of listing. And yes, that includes those sneakers you purchased on Afterpay. 
2. A Judgement:
   This is a court judgement and is a public record listing. It will stay on your credit file for 5 years from the date of listing. 
3. A ‘clear out’: |This is where you have stopped making payments and your creditor cannot make contact with you. Beware – this will ruin your credit rating for up to seven years from the date of listing.
4. Enquiries:
   Again Beware of these – just making an application for finance can put a BIG cross against your credit score. It doesn’t matter if the finance was approved or not or if you went ahead with the transaction. The act of making an application or enquiry for credit is enough to lower your credit score and result in an automatic decline. Most often we see the ‘buy now pay later’ (BNPL) enquiries reducing scoring for clients. For those that are self employed with trade accounts with suppliers a change in your account limit can also ruin your credit scoring. 
5. Repayment History Information (RHI)
   The information recorded on your Australian credit file includes details of when you were late in making repayments. Recently the legislation was changed to allow creditors to record this informaiton even if you were only a day or two late with the payment. 

Once there is a report that affects your credit score, this will immediately reduce the number of lenders we can access for mortgage lending. 

All is not lost though, there are lenders that will assist clients with bad/low credit scores, the downside is that they are not going to offer you a great interest rate, so you’re going to be paying for the services they offer in a big way. 

There are ways to ‘fix’ your credit score, this also costs money but it may be prreferable to the interest rate on a mortgage. 

Your credit file is available online through a number of different providers, take care to review any fees or other costs associated with obtaining the file. 

You can also speak to us, we can discuss your credit file and your options and hopefully assist you to turn that around.