Credit scores are numerical representations of your financial history, including late payments, credit inquiries, and loan defaults. It is crucial if you want to buy your first home, get a car loan, or apply for a credit card or personal loan.
Comprehensive Credit Reporting (CCR) was implemented in Australia in July 2018. Such “positive” activities, such as on-time bill payment, are also recorded on your credit report and may affect your credit score in a good way. A low credit score, on the other hand, may make obtaining finance for a first home, an automobile, or any other purpose difficult.
Read on to learn more about repairing your credit!
The Meaning of Your Credit Score
When you ask for credit or a loan, your credit score is used to establish your creditworthiness. Banks and other lenders may use this information to decide whether or not to lend you money, how much they will lend you, and even what interest rate they will charge.
Lenders may refuse to lend to you or charge you a higher interest rate than someone with a higher credit score. A low credit score could also indicate that you've never had credit.
While some lenders may look at your entire credit history, others will only look at recent transactions (in the last one to two years, for example). As a result, a recent track record of making on-time payments may be essential.
When deciding whether to approve you for a loan or other kind of credit, a lender will take into account more than just your credit score.
Credit checks are rarely revealed by lenders. Thus, check your credit score with several companies to ensure that the information on file is correct.
Determining a Bad Credit
Your credit score will differ slightly from one reporting agency to the next, and lenders may utilize it differently.
A credit score of "below average" means that you are in the bottom 20% of the credit-active population and are more likely than the general population to experience a negative event in the following year. An "average" credit score band suggests that an unpleasant occurrence is likely to occur within the next 12 months.
Each score is assigned a numerical value ranging from 0 to 1,000 by Experian. A creditor may consider your credit score between 0 and 549 to be below average. A fair score ranges from 550 to 624.
Illion scores range from 0 to 1,000, with 0 indicating no bad data, 1–299 suggesting some negative data, and 300–499 indicating that your score still needs to be improved.
A Bad Credit’s Lifespan
This score is determined by the information in your credit report at the time. It differs depending on the type of bankruptcy, debt agreement, or personal insolvency, as well as the length of time the information is kept on file. Bankruptcies, for example, remain on your credit report for five years from the date of filing or two years after discharge, whichever is longer.
Even if you pay off a past-due loan, it will appear on your credit report for five to seven years (depending on the type of overdue debt). Your credit report, on the other hand, will show your payments, which may help your credit score improve.
At the end of the day, there are ways to avoid having a bad credit score. Although, on the occasion that you find yourself in this situation, it’s crucial to seek professional assistance. Review this information and use it to your knowledge for when the time comes. This coupled with the advice of a financial advisor, you’ll be well on your way to bounce back!
For bad credit mortgage lenders, Wealthy You is an Australian mortgage company that offers various mortgage solutions, no matter your credit history! With our expert team, we can make things possible for you. Learn more and contact us for an obligation-free meeting!