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Bad credit can halt you in your tracks when you want to buy a new car, get a mortgage or take out a personal loan. Fortunately, there's a lot you can do to improve your score and set yourself onto a path of financial confidence.
We're breaking down what a bad credit score is classified as, how you can improve it and how to make sure it doesn't happen again in the future.
Banks know your credit score, so why shouldn't you? The Finder app updates your score automatically each month and lets you know if it changes. Pop in your phone number below to get your download link.
By submitting your phone number, you agree to the Finder privacy policy and terms of use
On a scale of 300 to 850, anything below 550 is considered a bad credit score. A good score is 700+ and anything around 800 is excellent.
Your credit report contains information about your financial history. Credit bureaus (such as Experian and Equifax) use this information to calculate your risk as a borrower, which is reflected as a credit score. Missed repayments, loan defaults, debt agreements and bankruptcy are all listed in your credit file and can result in a low credit score.
If you have a poor credit score it can get in the way of the credit you want and could mean you're turned down by a lender.
You can work on your score to improve the chance of a deal you're happy with. The key is to understand where your credit score is at and how to improve it.
To fix bad credit you can take plenty of action to improve your credit score and improve the likelihood of being approved for a loan.
You can use Finder's guide to credit repair to pick up more tips.
If you're worried you might have bad credit due to an error, it makes it even more important to stay on top of it. Make sure you're reading your credit report for mistakes. Your report will show three main things:
Some bad credit listings can't be fixed, but you should check if there are any mistakes in your credit report.
For example, you may have been a victim of fraud and not be responsible for one or more of the debts listed. It's also possible you've been credited with the debt of a family member or a stranger with a similar name to you.
Contact the credit reporting agency to report any errors and take the matter up with the credit provider if needed. You can also add positive information to your credit report that proves stability in your financial life, including having a full-time job, living at the same address for several years and owning a home.
Learn how to remove black marks on your credit record and how to remove credit inquiries from your report.
Your credit score will update once a month, if that. That means that any efforts you do now to improve your score could see benefits in a month from now.
If you've got some long-term issues with your credit report, you may need to show that you've continuously been working on it. As a result, it could take up to a year or more for your score to significantly improve.
The good news is that you can start making these changes immediately to get your future self in a better financial position.
It all depends on what kind of bad credit it is.
Your repayment history information stays on your report for two years.
Credit enquiries, payment defaults, overdue accounts, and court judgements will stay on your report for five years.
Overdue accounts listed as serious credit infringements will stay on your report for seven years.
Of course, if there's been an error you can get in touch with your credit bureau and get them to reverse it.
The higher your credit score, the more likely lenders will be to grant you a loan. The lower your credit score, the higher the risk of being forced to pay higher interest rates or being rejected for loans and credit cards. There's also a chance you're not eligible for 0% interest credit cards or loans.
Lenders check your credit file and credit score to determine the risk involved in lending you money and to ensure you can repay borrowed money in a timely fashion. If you have a less than ideal credit score or a few black marks on your file, this will raise red flags for the lender.
While you can't totally get rid of bad credit items on your report, there is a time limit for when they will be removed. All repayment history information will stay on your report for two years. Credit enquiries and applications as well as court judgments, summons and writs will hang around for five years, as will default payments.
But don't worry, it's not all doom and gloom. Your credit score is just one aspect of your finances that banks and lenders look at, so you can improve your chances through:
You're not alone if your credit score isn't quite where you'd like to see it. It's possible to improve your credit score with some bad credit indicators still on your file. The sooner you work on the issues dragging it down, the sooner you can reach a higher score.
Your credit file will give you a few warning signs as to what is causing your bad credit. These include:
Payment history information. All active ongoing payments are listed. If you have any missed or late repayments it may lower your credit score.
Lots of credit enquiries. Credit enquires or loan applications are not necessarily bad but they remain on your file for five years. Having numerous enquiries listed in a short period of time can be a bad sign though. Generally, applying for credit once every three months will not contribute to a lower score so keep that in mind.
Defaults. Debts higher than $150 that are more than 60 days late are considered a defaulted payment. Even once you pay the debt, the default will stay on your credit file for five years. Any overdue accounts listed as a clearout or serious credit infringement will also appear. Serious credit infringements are defaults that are not paid off and will stay on your report for seven years. The creditor must make multiple attempts to contact you at your address without success before it can list a serious credit infringement.
Late and missed payments. Any missed or late payments will be recorded on your file and can reflect negatively on your ability to manage a line of credit.
Writs and summons to court. If you have been summoned to court because of debt or a financial issue, this will be listed on your credit file. This can happen if you can't settle the debt directly with a creditor.
Court judgements. Your file will also hold a record of the outcome of any court cases relating to your debts.
Bankruptcy information. This will be listed if you enter into bankruptcy and will stay on your report for seven years. Bankruptcy lasts for three years and means you have been legally declared unable to repay your debts.
Tracking your credit score is the first step to taking control of your credit score. Knowing where you sit is the top way to know how you can take action to get where you want to go.
The Finder app can help your credit score. We'll update it automatically for you each month and will let you know if your score changes. We'll give you the tools you need to work on your credit, including what's in your credit report, your chance of credit approval and how to improve your credit position. You can also connect all of your accounts in the one place to make it a one-stop shop for all your finances.
The good news is – you are not your credit score. Even though it can feel disheartening, just because you have a sorry credit score doesn't mean you're a bad person. It could mean you sometimes flashed your credit card a few times too many or you missed a couple of car loan repayments when you were in a tricky spot.
Improving your credit is about what you want your credit to do for you. If you're aiming to buy a brand new car and lower your score enough to get a loan, then this will be a personal success for you. Either way, tracking your credit score is crucial for your goals and the Finder app can aid you every step of the way.
This guide explains credit score ranges from weak through to an excellent score. We cover the differences from Equifax, Experian and Illion.
Read more…Credit reporting bureaus issue credit reports and scores to consumers and lenders. Discover how they work in this guide.
Read more…If you're planning to cancel a credit card, here's what you need to know about the impact it could have on your credit score.
Read more…More data is about to be included in your credit file – find out why and what it means for your finances.
Read more…Get your credit score for free and understand how to read your credit report to get your finances under control.
Read more…Get your credit score and comprehensive report now!
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If I pay a default in full will it then be removed from my credit report
Hi,
Thanks for contacting Finder.
I’m afraid that defaults will stay on the file for five years from the time it was listed. Unless, it’s erroneously listed, it’s not possible to remove a default if the five-year period has not been served. So, even if it’s already paid, you may need to wait for 5 years before it will disappear from your file.
Kind Regards,
Faye
I have a Court Summons with an outstanding debt listed. The debt is paid. Can I get this removed therefore increasing my credit score?
Hello Kenny,
Thank you for your comment.
Yes, you can have it removed by contacting the lender or the creditor so they can submit a report to the credit reporting bureau. Another way is to file a dispute with the credit reporting bureau so they can investigate the issue. You can get more details about removing credit report black marks.
Should you wish to have real-time answers to your questions, try our chatbox on the lower right corner of our page.
Regards,
Jhezelyn
Would like to know about my credit score which is in my case it’s most probably not too good. However, how and what can I do to fix it? Cheers. Marie
Hello Marie,
Thank you for sending your inquiry today. :)
We do have a guide that will help you repair your credit report.
If it interests you, please request a free copy of your credit report/score.
Simply add your phone number to get our Finder app and start requesting your credit score.
Alternatively, you can click on the “Continue on web” if you wish not to get your score through the app.
A pop-up window would appear. Click on the “Log in” tab if you already have a Finder account. Click on the “Register” tab if you wish to create a new account.
Once you’re in, you can then request your credit score.
Hope this helps.
Cheers,
Jonathan