How to Fix Your Bad Credit Report

By Angela Monroe - July 5, 2019

A credit report is a record of your past and present debts incurred through credit cards and loans. 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 the credit reporting bureau (CRB) based on all the information in your report. 

Why Fix Your Bad Credit

The CRB keeps your credit report on file. The report is updated monthly to reflect your most recent credit standing. Every time you inquire or apply for a new loan, the lenders will access your credit report and use it as a basis for granting or rejecting your loan application. It also influences the interest rate and terms of your 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 outstanding. The more impressive your credit profile, the higher your credit score. The higher your score, the easier you get approved for loans at low interest rates and favourable terms.

If you have an unfortunate history of late repayments and loan default, however, it’s not yet the end of the road for you. Bounce back by fixing your bad credit report and building good credit habits. The earlier you do this, the sooner you’ll have a clean credit report with a good credit score.

Follow these steps to fix your bad credit score fast:

1. First things first: Request a copy of your credit report.

You can get a free copy of your credit report every year from the national credit reporting bureaus. Aside from being entitled to a free annual copy, you can also get it for free when you have been refused a loan within the past 90 days and when the CRB or lender advises you to correct information on your report. 

In Australia, there are four CRBs that collate your financial information from banks and other creditors, including Experian,  Equifax, Dun and Bradstreet and the Tasmanian Collection Service. If you request for your credit report, they need to send you the file within 10 days. You can also get it at an earlier time for a fee. 

2. Dispute any errors on your credit report.

Once you have your credit report on hand, start checking for any errors and false information that have possibly caused your credit score to plummet. 

If you find erroneous pieces of information, like a false default or repayment information, draft a dispute letter and send it to the CRB 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.

You have a maximum of 30 days to wait for the CRB’s response, as mandated by law. Thus, it’s best to send your dispute via a certified mail with a return receipt to have a proof of the delivery date. Within the 30-day period, the CRB will contact the lender that reported the erroneous information against you before getting back to you with a decision. However, the CRB may need more documents before the final decision. Your back and forth correspondence with them will likely delay the resolution. Generally, it takes around 3 to 6 months to resolve credit report disputes.

If your dispute is approved, the erroneous information on your report will be corrected or deleted. 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 past due accounts.

If you can’t find any false information on your credit report, proceed to settle any late payments. This is very important because your payment history has the biggest impact on your credit score, making for about 35%.

To cover your entire delinquent balance, make a lump-sum payment. Prioritise the past due accounts that are about 90 days late. Any balance after the 90-day period is considered extremely delinquent. This could be forwarded by your lender to collections, hurting your credit score even more.

If you have charge-offs and collection accounts, ask your lender or debt collector to have them remove from your credit report. This may not be easy to negotiate, but you can pay for their deletion. 

4. Pay outstanding judgements.

If a lender wins a debt collection lawsuit 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.

However, it is best 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 left an outstanding judgement unsettled, the more damaging its financial consequences become.

5. Refinance your loan.

It is never advisable to pay late but it is better than paying much later. In many cases, late repayments that are within 30 days of the due date are not reported to the CRB. 

You can settle past due accounts through debt consolidation or refinancing. Consolidating your past due 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. However, you need to pledge collateral to get approved and risk losing your assets if you can’t make payments on the new loan.

If you decide to consolidate your debts with a new loan, negotiate for better terms. Some refinancing lenders will try to offer short-term variations to repayment schedules. Do not agree to payment terms that you cannot meet. If you don’t know when your finances will improve, ask the lender to have the initial arrangement be reviewed at the end of the agreed repayment arrangement.

6. Get a Bad Credit Loan

A bad credit loan provides you with access to funds despite your bad credit score, as well as helps you improve your credit rating. All your payments activities will be recorded on your credit profile. 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 report will become a thing of the past.

 

Loans For People With Bad Credit offers different types of bad credit financing for people across Australia. We have over 35 years of experience in helping people with a bad credit history get a loan at reasonable rates and terms. Call us on 1300 769 384 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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