Find out where your credit history stands and take the next step towards better credit.
A listing on your credit report such as a defaulted payment, a debt agreement or even multiple credit enquiries can create what is known as "bad credit". While bad credit is a blanket term, it means a different things and can last varying amounts of time – from a few months to seven years. In the guide below you'll learn more about what bad credit is, what options you have for bad credit finance and how you can improve your credit standing.
What is "bad credit history"?
Speak to two different people who have bad credit and you will likely hear two very different stories. If you look at their credit files it's also likely you'll see varying degrees of what bad credit can mean. Any negative listing on your credit file can mean you have bad credit. This includes a late payment, a bankruptcy, or making multiple applications for credit in a short space of time. However, all of these are not equally "bad". For example, someone who is bankrupt will have a harder time getting a loan than someone who has three credit enquiries listed on their credit file six months ago.
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How does having bad credit history affect you?
Any type of provider that requires a credit contract will check your credit history, and if you have negative listings you may not be able to be approved. While you may be aware that most lenders check your credit file when approving you for a loan or credit card, other providers will check your credit file as well.
If you're applying for a personal loan, credit card or home loan, you may find your options limited to lenders with more flexible criteria; bad credit products; or products with tiered rates (with bad credit applicants charged a higher rate).
Getting a mobile phone contract with bad credit
Mobile phone providers will check your credit history before granting you a postpaid mobile contract. This is because these contracts often mean receiving a new phone up front and paying it off over the term of the contract. Having a good credit shows the provider that a person is likely to make their repayments. A bad credit score could mean the provider risks giving out a new phone and not being paid for it. So what options do you have?
Often, the only immediate solution is to sign-up for a prepaid mobile plan where you get a SIM card and pay for your plan one month at a time, in advance. Unfortunately, these plans do not come with the option of getting a new phone. So, if a new phone is a requirement you'd need to buy it outright.
Types of negative credit listings
There are various types of negative credit listings, and not all remain in your credit file for the same amount of time.
- Late payments. If you make your loan or credit card repayments more than 14 days past the due date it can be recorded on your credit file. This information stays on your file for up to two years. While one late payment may impact your credit rating, regularly making your payments late may indicate to lenders that you can't manage your credit accounts.
- Credit applications. Applying for credit accounts is not in itself a sign of poor credit. However, making multiple applications in a short space of time, for example, one to three months, may indicate to lenders that you are financially stressed. It's best practice to space out your applications for credit if possible.
- Overdue accounts. An overdue debt, such as a phone or electricity bill, can be listed on your credit report when it's overdue by 60 days or more and when the debt is at least $150. This is referred to as a consumer payment default. The telco or utility provider needs to be licensed credit provider to list the debt on your credit file and they need to have sent a written notice. Once the debt is paid the listing will be updated, but not removed, and will remain on your file. If the account is still open the listing will show "payment status – current".
- Serious credit infringements and clearouts. If you owe a credit provider money and appear to, or leave your current address without providing a new address, this is a serious credit infringement. For a credit infringement to be listed the provider needs to first list the default, have attempted to contact you a number of times and not had contact from for you for six months. Credit infringements remain on your report for seven years, but if they're paid they revert back to a default and remain on there for five.
- Bankruptcies and debt agreements. If you enter into a debt agreement or bankruptcy this will be listed on your credit file. Bankruptcy remains on your file for five years from the date you became bankrupt or two years from the date you're discharged, whichever is later. If you enter into a debt agreement it will appear on your credit file for five years, or longer in some cases.
What options do you have if you have bad credit?
If you have bad credit you should find out exactly what’s in your credit file to know where you stand. You can check your full credit report and credit score for free with finder and track your credit position in your account. Once you have your credit file you can go through each listing to ensure they are accurate and to see what your situation is.
If you have defaults and other similar negative listings on your file you still have options for finance:
- Personal loans. Whether you're looking for a larger loan up to $5,000 or even up to $10,000, there are lenders that may consider you. You can also consider some of your short-term loan options where you can borrow smaller amounts – between $100 and $2,000 – for between 16 days and one year.
- Home loans. If you are in a stable financial situation and don't want to wait for the negative listings to come off your file, you can consider some of the bad credit home loan options that are available.
- Credit cards. There are no "bad credit" credit cards available in the Australian market. However, there are other ways for you to access your money. You can opt for a prepaid debit card to access your own funds, or if you already have a loan with a short-term lender, you can take advantage of some of the prepaid debit cards they have on offer. Depending on your credit history and your relationship with your current bank, you may also be able to get a low limit credit card from them.
Have more questions about bad credit?
What details do I have to provide to get my credit report?
You will need your name, date of birth, address and Australia driver's licence or passport details to get your free credit report from finder.
How do I go about fixing an error on my credit file?
If you spot an error, get in touch with the lender in question and ask it them to rectify the mistake. If you’re not happy with the way the lender handles this, you can always get in touch with the relevant Ombudsman service.
Can I have information removed from your credit report?
You can only have listings removed if they were listed there incorrectly in the first place. You can find out more about credit repair on this page.