Are you in financial distress? Talk to your current bank before applying for more credit. You can also call the National Debt Helpline on 1800 007 007.
Why it's risky to apply for a credit card if you have bad credit
Bad credit, such as late payments, defaults of bankruptcy, can indicate that you have trouble paying off debts. This increases the risk for credit card issuers, both financially and in regards to the governments strict responsible lending obligations.
Getting rejected for credit card also puts a negative mark on your credit report. This means that someone with bad credit who applies for a credit card before fixing their credit problems could end up with a lower credit score. In fact, Finder research has found 21% of Australians who have been declined a credit card said it was due to bad credit.
4 steps to increase your chance of approval
Step 1: Pay off existing debt. If you've got a loan, outstanding bills or other credit card debt, start making regular repayments. If you're struggling, you could also request a hardship variation. When a lender checks your credit report, regular repayments towards your existing debt will be viewed positively.
Step 2: Start saving. We know it might be easier said than done, but having some savings in the bank shows lenders that you'll be able to repay your credit card in the future.
Step 3: Wait until you meet the eligibility criteria. Most credit cards list an income requirement for approval. If you don't meet that, your application will automatically be rejected. Look for cards with a low minimum-income requirement or wait til you're eligible for the card you want.
Step 4: Get help if you need it. If you're struggling financially, you can speak with a financial counsellor for free by calling 1800 007 007 or through the National Debt Helpline online chat service.
How do I check my credit score?
It's always a good idea to check your credit score before applying for a loan or credit card. You might not even be aware that you have bad credit until you check.
You can check your credit score for free through Finder at the link below.
Once you've got your credit score, you can see if there are any issues and take steps to address them. You might even find there's a mistake in the report, such as a debt that doesn't belong to you.
You can get these errors fixed and improve your credit score. But you won't know about them until you check.
There are no specific credit cards for people with bad credit. That's part of why it's hard to get approved for a card as a borrower with bad credit.
A better option might be other forms of credit, like a short-term loan or a bad credit personal loan. These products are often designed for borrowers with bad credit.
Short-term loans. This is a loan of up to $2,000 that has to be repaid between 16 days and 1 year, but usually terms are around 62 days. Keep in mind these loans come with high fees (a 20% establishment fee and a 4% monthly fee) so really consider how much you need it before you apply.
Bad credit personal loans. If you're in need of a larger amount than a short-term loan offers, there are some bad credit personal loans available that can offer amounts up to $5,000 or even $10,000. These loans usually come with a flat interest rate and, if you repay responsibly, can be used to rebuild your creditworthiness.
Low-limit credit cards. If you have bad credit and you're working to improve it, consider a card with a low minimum credit limit. This reduces the risk to the lender and you may be more likely to get approved. Once you prove that you can make repayments and are doing so regularly, you can choose to apply to increase your limit in the future.
Frequently asked questions
If you think there is an error on your credit report, you can request a correction. You just have to contact the credit bureau directly, usually by filling out a simple form online.
No. Australia has strict lending rules that dictate that every lender must assess your suitability for a credit card. This includes your credit history, assets, liabilities, income and other financial measures.
No. According to Services Australia, Centrelink debts do not affect your credit score.
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To make sure you get accurate and helpful information, this guide has been edited by David Gregory as part of our fact-checking process.
Amy Bradney-George was the senior writer for credit cards at Finder, and editorial lead for Finder Green. She has over 16 years of editorial experience and has been featured in publications including ABC News, Money Magazine and The Sydney Morning Herald. See full bio
Amy's expertise
Amy has written 574 Finder guides across topics including:
Richard Whitten is a money editor at Finder, and has been covering home loans, property and personal finance for 6+ years. He has written for Yahoo Finance, Money Magazine and Homely; and has appeared on various radio shows nationwide. He holds a Certificate IV in mortgage broking and finance (RG 206), a Tier 1 Generic Knowledge certification and a Tier 2 General Advice Deposit Products (RG 146) certification. See full bio
Richard's expertise
Richard has written 541 Finder guides across topics including:
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