Credit ratings: What is “bad credit’ and “good credit”?

Where's the line drawn between good and bad credit and how can you improve your score?

Your credit history has always been a determining factor in whether or not you were approved for a loan or credit account. However, your credit history and score has become more important with the arrival of comprehensive credit reporting (meaning more data is listed on your report) and risk-based pricing (where lenders can set an interest rate based on your credit profile).

So, the million dollar question is, do you have a good or bad credit rating? Let's find out how you can tell.

What is a good credit rating?

A good credit rating is when your credit score is high. How high? Well, that's when it gets tricky. There are a few different credit reporting bodies and they all have different systems for scoring credit. For example, if you get your free credit score from finder it will be delivered from Experian and it will be a number between 0 and 1,000. However, Equifax's credit score system rates credit scores between 0 and 1,200.

See how the credit score systems break down below:

How can I improve my credit rating?

• Establish healthy accounts. As long as you regularly pay your bill on time, having a mobile or internet plan, electricity account or Foxtel service in your name is a good way to establish proof that you are a responsible borrower.
• Make on-time payments. The last two years of your repayment history is now listed on your credit report, so it's important to make your repayments on time. If you are late with one or two repayments just make sure you keep up with all of your following repayments.
• Lower your credit limits. The credit limits of your open credit accounts are listed on your report, but not how much debt you have. So if you have three credit cards with high limits but only a bit of debt, it still may have a negative effect on your rating. Reduce your unused limit for an easy credit rating win.
• Demonstrating job stability. Staying in the same job for a few years, rather than frequency hopping between jobs, demonstrates responsibility to potential lenders, as well as your ability to repay.
• Stay in the same place. Long-term rental or homeownership also demonstrates responsibility and gives lenders the comfort of knowing you’re not likely to default on your payments.
• Make infrequent credit applications. Each credit application you make shows up on your credit report regardless of whether it is approved. Having numerous credit applications on your report in a short space of time will have a negative effect on your credit rating.

Learn more ways to improve your credit rating

What is a bad credit rating?

A bad credit rating can result in rejected applications, lower credit limits and more restrictive repayment terms. A bad credit report is usually scarred by things like bankruptcy declarations, payment defaults, court charges or court writs relating to finance (such as fines and fraud charges). Less extreme black marks include late payments, high credit balances and frequent applications for credit (such as applying for three credit cards in a month).

Having a lot of active credit accounts can also negatively affect your credit score, especially if you also have issues with any of the above. Unless all of your accounts are in good standing, this could indicate a lack of responsibility when managing your credit.

What can cause a bad credit rating?

The following can result in a negative credit rating:

• Numerous credit accounts and applications. Having too many loans to your name isn’t a good look because it puts in question your ability to manage and repay all of them at once. All loan applications stay on record for five years.
• Credit enquiries. Every time you apply for credit, the lender makes an enquiry on your credit history. This enquiry itself is then recorded on the report going forward, leaving a trail of credit enquiries that other future lenders will not look favourably upon. These stay on record for five years.
• Late or skipped payments. Poor payment habits can be a warning sign to potential lenders, so it is always better to make a repayment on time, even if it’s a small or partial amount. It's also important to remember that loan repayment history stays on your record for two years.
• Credit defaults. This happens when a lender takes action to retrieve an outstanding payment and stays on your record for five years.
• Court writs and summons. These legal blemishes stay on your record for four years.
• Serious credit infringement or clearouts. If you fail to make payment and the creditor is unable to contact you for more than six months, a serious credit infringement will be marked on your record for seven years.
• Bankruptcy and insolvency. These will stay on your report for five years after the start of insolvency, or two years after the insolvency ends, whichever is longer.

How to repair bad credit rating in Australia

How can I check my credit rating?

You can check your credit score and get your full credit report for free with finder. Follow the link below to sign up and get yours today.
Get your free credit score and credit reportIf you'd prefer to order it directly from the credit bureau, you also have that option.

What are my options if I have a bad credit rating?

If you have bad credit listings on your credit report it's a good idea to engage in good credit behaviour, such as making repayments on time and not applying for credit too often, as you wait for the bad credit listings to come off your report. It could be worth taking stock of all your credit accounts or consolidating debts so that it becomes easier to pay them off, which will improve your credit score in the long run.

If you're in need of credit, there are personal loans and credit cards that cater to customers with bad credit ratings – see some of your options below.

While knowing your credit rating is useful when improving your credit history or applying for a loan, it's merely an indicator of whether you'll get the credit you want. You should also consider other eligibility requirements such as your present employment, total income and current assets before you apply for your next line of credit.

Lenders that offer personal loans to bad credit borrowers

• Short-Term Options
• Medium-Term Options

Rates last updated October 21st, 2018

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Name	Product	Max. Loan Amount	Term of Loan	Turnaround Time	Costs	Fortnightly Repayment $1,500	Product Description
Sunshine Short Term Loans		$2,000	9-15 weeks	30 minutes - conditions apply	20% of loan amount + 4% of loan amount each month	$396	A small loan up to $2,000 that you repay over 9-15 weeks. Loans approved and funded in as little as 30 minutes. Centrelink must not be your primary income	Go to site More	Compare	loading Fetching your data...
Wallet Wizard Smart Loan (Up to 2K)		$2,000	Up to 2 years	3 hours - conditions apply	47.8%	$316.70	Apply for up to $2,000 and be able to access your approved loan as a convenient line of credit.	Go to site More	Compare	loading Fetching your data...
Nimble Short Term Loan		$2,000	62 days to 1 year	1 hour - conditions apply	20% of loan amount + 4% of loan amount each month	$396	A loan up to $2,000 with terms up to 62 days to 1 year. Centrelink cannot be your primary source of income.	Go to site More	Compare	loading Fetching your data...
Credit24 Short Term Loan		$2,000	6-12 months	Same day - conditions apply	20% of loan amount establishment fee + 4% of loan amount monthly.	$396	Credit24 offers this loan up to $2,000 and gives you 12 months to repay.	Go to site More	Compare	loading Fetching your data...
Moneyspot Small Loan		$2,000	Up to 90 days	1 hour - conditions apply	20% of loan amount establishment fee + 4% of loan amount monthly.	$396	Borrow under $2,000 and benefit from a transparent fee structure and a simple application. Bad credit borrowers considered.	Go to site More	Compare	loading Fetching your data...
Ferratum Cash Loans		$1,900	up to 6 months	Same day - conditions apply	20% of borrowed amount + 4% of borrowed amount each month	$396	Borrow what you need with loans starting from $300 and approval in minutes.	Go to site More	Compare	loading Fetching your data...

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Rates last updated October 21st, 2018

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Name	Product	Product Description	Max. Loan Amount	Term of Loan	Turnaround Time	Costs	Fortnightly Repayment $5,000
Wallet Wizard Smart Loan		Apply for up to $5,000 and be able to access your approved loan as a convenient line of credit.	$5,000	Up to 2 years	24 hours	47.8%	$243.50	Go to site More	Compare	loading Fetching your data...
Swoosh Finance		A secured loan up to $4,600 you can apply for in 10 minutes. Have up to 2 years to repay what you borrow.	$4,600	12-24 months	Next business day	$400 + 48% p.a. of borrowed amount	$244	Go to site More	Compare	loading Fetching your data...
Nimble Medium Loan		Apply for up to $5,000 and have up to 2 years to repay.	$5,000	Up to 2 years	1 hour - conditions apply*	Application fee of $400 + 47.62% p.a.	$262.75	Go to site More	Compare	loading Fetching your data...
Credit24 Medium Term Loan (Good Credit)		A small loan with long terms: Apply for up to $5,000 and have up to 2 years to repay.	$5,000	12-24 months	Same day	$400 establishment fee + 48% p.a. interest	$263.18	Go to site More	Compare	loading Fetching your data...
Fair Go Finance Personal Loan		A larger loan up to $10,000 you can apply for even with bad credit. Fast turnaround within 1 business day. Note: You must earn more than $500 per week.	$10,000	3-36 months	Within 24 hours	from 17.90% p.a. + establishment fee of between $460 - $695 + $5 monthly fee	$238.07	Go to site More	Compare	loading Fetching your data...

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