How Does a Bad Credit Rating Affect You?

By Angela Monroe - July 30, 2018

Do you have a low credit rating? If you are aware of a bad credit rating but want to take out a loan, it’s worth understanding how your credit score can affect your situation.

Don’t panic—our experts are on hand waiting to help you find the right loan despite your bad credit rating. Contact us today to find out how we can help you with bad credit loans.

What is a credit rating?

It’s highly likely that you’ve never actually had to consider what your credit rating is—until you need a loan. If you’re trying to buy a home or get a car loan, your credit rating becomes very important very quickly, and it can be a real obstacle if you find out you have a bad credit rating.

Credit ratings are scores between 0 and 1,200 or 0 and 1,000, depending on the credit reporting agency. Your score is based on your credit history which is recorded in your credit record.

Generally, the lower your credit rating, the higher risk you are to a lender. If you have a low score, you could be more likely to either pay higher fees or to struggle with finding a loan.

If you’re not sure what your credit score is, we can help you find out with a free credit check.

What can hurt and help your credit rating?

Payment history

A lender will want to know about your payment history, including details such as whether or not you have always paid bills on time, whether you regularly miss payments, and whether you have many outstanding debts.

Getting all of your payments in order and trying to pay bills as quickly as possible after you receive them is something that will really help your credit rating, so get organised and budget responsibly wherever possible.

Amounts owed

This is useful to a lender to know as it indicates whether you are currently in debt and if so, how much you owe.

Ideally, you should always try to pay off outstanding loans through regular monthly payments. With credit cards, you should try not to exceed 30 per cent of your credit limit.

Duration of credit history

This concerns how long you have been using credit. Ironically, some people have a bad credit rating simply because they have never used credit before. This can be a real problem for younger people wanting to take out their first loans.

However, if you do have a short or non-existent credit history, lenders can often look favourably on those who have an otherwise good credit rating in other areas such as regular bill repayments and good spending habits.

Credit applications

It’s easy to make numerous credit applications, especially with the speed that you can do so online. However, be aware that lenders will check your credit applications and numerous examples to different companies will raise red flags for them.

Try to only make a credit application if you genuinely need it. Alternatively, leave it to us and speak to one of our experts today.

How does a bad credit rating affect you?

If you have a bad credit rating, it could mean that successfully applying for a loan becomes very difficult. This could affect you buying a home, a car or making other large purchases.

It’s important that you seek expert advice and get help to find the best loan possible with your bad credit rating. Get in touch with us for advice.

Understanding bad credit rating

If you have a bad credit rating, you are likely to pay much higher interest rates on a loan, often up to a two per cent difference.

This might not sound like a lot, but if you consider this situation on a mortgage over a period of 30 years, you could easily be spending tens of thousands of dollars more than if you didn’t have a bad credit rating.

So, it’s really important to remember that a bad credit rating doesn’t have to mean that you can never secure a loan in the future. Speak to one of our experts today to help get you on the right track to improving your credit rating and finding the right loan for you, even with bad credit.

Angela Monroe
Angela Monroe is the Community Manager at The Positive Group, specialising in giving people the information that they need when they need it, and putting you on the path to a fair financial future. She has 8 years of experience in helping Australians find the right finance solutions, and regularly contributes articles to empower Australians with the knowledge they need to become financially healthy.

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