Finding yourself in a position of bad credit isn’t an ideal place to be. Unfortunately, sometimes it can’t be avoided. Life is unpredictable, which means unexpected expenses crop up from time to time that haven’t been budgeted for.
In an ideal world, you would have a savings account as a safety net, but this isn’t always the case. Whether you get into an accident, need to repair your car or have damage to your home, these unexpected situations can leave you in a position of bad credit. So, what is bad credit?
What Is Bad Credit?
Are you wondering: what is bad credit? If you have missed a repayment on a loan, defaulted on it completely, or done anything else that may reflect poorly on your lending history, this will leave a negative listing on your credit file.
Everyone has a credit score, which is a number between 0 and 1200 (depending upon the credit reporting agency) that is determined by your credit report. There are a number of factors that contribute to your credit score, such as borrowing history, repayments, defaults, court judgements and bankruptcy.
So, what is bad credit? When your credit score is sitting under 500, it is considered to be a bad credit score. This means that taking out a future loan will be extra difficult. Lenders use your credit score to determine your value as a borrower and how reliable you are. If you have a bad credit score, they are less likely to take a risk on you.
Thankfully, if you are willing to look beyond traditional lenders, such as banks, there are those out there who will take you on with a bad credit loan.
How To Fix Bad Credit
Unfortunately, there is no easy fix when it comes to bad credit. It generally just takes time, waiting it out until the negative listing is cleared from your file. However, here are some steps you can take:
- Check for errors: people make mistakes. Make sure you check your credit file and make sure all the listings are correct. If you see an error, then report it.
- Lower your credit card limit.
- Avoid taking out further loans.
- Pay all your bills and repayments on time.
- Be patient. It does take time, but you will notice improvements if you make these changes.
What Is Bad Credit? Bad Credit Loans
Now that you understand what is bad credit, you might be wondering what options there are for you when it comes to your borrowing ability. Ideally, it’s a good idea to fix up your credit report to get you back on track financially. Unless you believe there was a credit reporting error, then the first step should always be to pay back the loan which is owed. This will be noted on your file and shows that you made a good effort to rectify your mistake.
Negative credit listings generally stay on a credit file for up to five years depending on your circumstances. So if you don’t want to wait that long then credit repair is your best option. Clean Credit are credit repair experts who can dispute any negative credit listings on your behalf. We have helped thousands of Aussie’s to repair their credit file and get back on track. After enquiring, in some cases, you could have your slate wiped clean within as little as 30 days.
If you are not willing to wait a little while for your credit file repair, or if you cannot afford the fee’s that come with credit repair, then do have the option to take out a bad credit loan.
Bad Credit Loans
What is a bad credit loan? Bad credit loans are exactly as they sound. They are loans for people who find themselves in a position of bad credit. Often the lender is willing to overlook your credit score and take into account your personal circumstances. Instead, they are more interested in your current finances, and whether or not you have the ability to pay back your loan.
It’s important to note that most bad credit loans will come with higher interest rates than normal loans. This is because the lender is taking on all the risk in this circumstance. You need to make sure you can afford the repayments with the higher interest rates before going ahead. After asking “what is bad credit”, the next thing to do is to find out how you can avoid it.
The good news is a bad credit loan can help improve your credit score. Assuming you pay it back on time and meet all the repayments, it will reflect positively on your borrowing ability. However, at the end of the day, if you are looking for more control over your finances and more say in taking out a loan, you need to take a look at your credit history and get it back on track.
Getting Back On Track
The first step is to get yourself back on track financially. There is no point in taking out a new loan unless you feel confident that you have the means to pay it back. If you are looking to give your credit score a much-needed boost, then speak to the team at Clean Credit today.
As one of Australia’s leading credit repair companies, we can help you regain control of your finances and repair your credit. This will broaden your options when it comes to taking out that next loan. Find the help you need and get in touch today.