How to Fix a Bad Credit Report

By Angela Monroe - March 10, 2022

fix bad credit

A good credit history is a key ingredient in getting approved for a car loan. But if you don’t have good credit history, it can be tough – unless you fix bad credit.

Here’s how.

Firstly, what’s a credit report?

Car Loan After Repossession Summary

A credit report is a record of your past and present debts incurred through things like credit cards, loans, phone plans and more. It contains your personal information along with a detailed summary of your credit history as reported by your previous creditors.

It also bears your credit score, which is assigned to you by a credit reporting agency like Equifax [link]. The score is based on all the information in your report. It is important to fix your bad credit history as soon as possible.

Here in Australia, if you’re over 18 and have ever applied for credit, even a phone plan, you’ll have likely generated a credit report.

Why Fix Your Bad Credit

Did you know that every time you inquire or apply for a loan, lenders will access your credit report and use it as a basis for granting or rejecting your loan application?

These reports are pretty important.

It also influences the interest rate and terms of a loan if you are approved for one. Sometimes, insurance companies also access your credit report to determine your risk factor and insurance premiums. 

Because the credit report determines your creditworthiness and risk profile, it is important to keep it polished. The more impressive your credit profile, the higher your credit score – and the more chance you have of getting your loan approved.

If you have a history of late repayments and loan defaults, it’s not yet the end of the road for you.

Follow these steps to fix your bad credit score fast:

1. Request a copy of your credit report

woman looking at laptop

This is the easy part. You can get a copy of your credit report from reporting agencies like Equifax [link]. To fix bad credit, you’ll need to actually know your credit history.

Note that although there are numerous reporting agencies in Australia, Equifax is commonly used.

If you request multiple copies of your report or need it urgently, there may be a fee involved.

You can also get a free credit check here and have it explained by a professional.

2. Dispute any errors on your credit report

Once you have your credit report on hand, start checking for any errors and incorrect information.

Reporting agencies deal with literally millions of people’s credit reports and sometimes there can be mistakes.

If you find incorrect information, like a false default or repayment information, draft a dispute email and send it to the agency that issued your credit report. Ask them to correct the mistake. Don’t forget to attach all supporting documents that can help verify the truthfulness of your claim.

Most agencies have ways to fix bad credit mistakes on their websites.

You have a maximum of 30 days to wait for a response, as mandated by law. 

Within the 30-day period, the agency will contact the lender that reported the mistake before getting back to you with an outcome or a request for more information. 

Your back and forth correspondence with them will likely delay the resolution. It can sometimes take a while to resolve credit report disputes.

If any mistakes are fixed, your credit score will dramatically improve and your chances of approval for future lines of credit will increase.

If not approved, the dispute won’t damage your credit profile further.

3. Settle overdue accounts

man taking out wallet

Settle any late payments you might have. This is important because your payment history has a big impact on your credit score, making for about 35%.

Prioritise the past due accounts that are about 90 days late. Any balance overdue after a 90-day period is considered extremely late. This could be forwarded by your lender to a debt collection agency, hurting your credit score even more.

If you have collection accounts, try and ask your lender or debt collector to have them removed from your credit report. 

This also includes any debt collection lawsuits against you. Make payment arrangements within 30 days or repay the debt in full.

Typically, the payment for an outstanding judgement will not only cover your debt obligation and the accrued interest on the outstanding balance from the filing date, but also the court costs and the lender’s legal fees.

Tip: It’s better to pay for all these fees than let it sit on your credit profile for many years. Outstanding judgements appear on your credit report for seven years or within the applicable statute of limitations, greatly damaging your credit score and borrowing. The longer you leave an outstanding judgement unsettled, the more damaging its financial consequences become.

4. Refinance your loan

Did you know that you can settle past due accounts through debt consolidation or refinancing?

Consolidating debts with a personal loan gives you more time to repay. It can also lower your interest cost and required payment. You can also consolidate your debt by refinancing with a new secured loan.

Often, people consolidate debts to get a better rate, longer loan term, one scheduled repayment per pay cycle and lower repayments.

If you decide to consolidate your debts with a new loan, make sure it has better terms.

5. Get a bad credit loan

woman handing back car keys

A bad credit loan provides you with access to funds despite your bad credit score, as well as helps you improve and fix your credit rating. 

All your repayment activities will be recorded on your credit profile so be sure to make on-time repayments and complete your loan obligation according to its terms. In time, your credit score will improve and your bad credit will become a thing of the past.

This is sometimes called building credit.

Loans For People With Bad Credit offers different types of bad credit financing for people across Australia. Call us on 1300 789 617 or complete our quick Bad Credit Loan Pre-Approval form.

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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