Even if you have a bad credit rating there are still financing roads you can take.
Having a bad credit score can make a lot of financial products out of reach, but it's important to remember there are still options available. This guide will take you through what lenders define as "bad" credit, what credit options you might have available to you if you don't have a high credit score and how to find the best option for you.
How "bad" is your credit?
There is no one definition of bad credit, and your definition of "bad" bad differ from another person's the same way as one lender's definition might differ from another's. Generally, bad credit means that you have negative listings on your file, which can mean anything from defaults, bankruptcy, debt agreements, multiple recent credit enquiries or missed or late payments.
To find out your credit position, you can get your free credit score and then see what credit band you're in. You can also order a free copy of your credit file to get a better understanding of your credit position.
Finance options to consider with a bad credit rating
If you have any negative listings on your credit file (bankruptcies, defaults, multiple missed payments or credit enquiries, etc) or your credit score falls in the lower credit score ranges and you find that you are not eligible for a traditional credit card or loan, you can consider some of the following:
- Short term loan. This is a loan of between $100 and $2,000 that you can apply for with bad credit. You'll pay an establishment fee of 20% of what you borrow as well as a monthly fee of 4% and loan terms generally range from 62 days to one year.
- Medium amount loan. These are slightly larger loans available to people with adverse credit histories. Usually offered by lenders that also provide short term loans, they are available for up to $5,000 or $10,000 and come with a rate of up to 48% p.a. Loans of between $2,001 and $5,000 also come with a $400 establishment fee.
- Centrelink cash advance. If you receive Centrelink payments you may be eligible for an advance. Eligibility depends on how long you've been receiving your payments and how much you receive. Keep in mind you can only receive a cash advance once per year.
- No Interest Loan scheme (NILs). This scheme is provided by Good Shepherd Microfinance and allows those on low incomes or healthcare or pension card holders to apply for loans of between $300-$1,200. These loans must be used for essential goods and services and you need to show a willingness and capacity to repay.
- Centrelink borrowers considered
- Fast approval service
- Borrow up to $2,000
100% confidential application
Sunshine Short Term Offer
This is a short term loan offer with a fast and easy online application for bad credit borrowers who are employed. You can apply today to get approved for up to $2,000.
- Loan amount: $2,000
- Loan term: 9 weeks
- Turnaround time: 30 Minutes - conditions apply
- Fees: 20% of borrowed amount + 4% of borrowed amount each month
- Bad credit borrowers OK
- Quick and easy Approval
- No Credit Checks - Must be employed
Short-term loan alternatives for applicants with bad credit
Quick guide to understanding your credit position
Whenever you apply for a credit card, make a repayment or make a transaction with your credit card, it has an impact on your credit file. Your credit file and credit score are used by lenders (as well as other information such as your income and employment) as a way to determine whether you're a low-risk applicant.
Your credit score will fall into one of these credit grades:
|Credit position||Equifax Score||Percentile||Likeliness of an adverse event being recorded on your file in the next 12 months|
|Below average||0-509||81-100%||Very highly likely|
Have you done any of the following? It may mean you have bad credit.
- Missed a credit card or loan payment in the last two years. Your monthly payment information can appear on your credit file and will remain there for two years.
- Defaulted on a credit card or loan in the last five years. Overdue accounts of $150 or more that are 60 days or more overdue remain on your file for five years and damage your credit score.
- Declared bankruptcy in the last five years. A bankruptcy listing remains on your credit file for five years from the date you become bankrupt or two years from the date you are discharged, whichever is later.
- Made multiple enquiries for credit cards or loans in the last six months. While credit enquiries remain on your file for five years, they are not necessarily a negative listing. Credit enquiries are really only a red flag to lenders and affect your credit score negatively if there are multiple enquiries in a short space of time and these are in the last few months.
What to do if you find an error
If you find an error on your credit file, it's important to report it and have it resolved as soon as possible. An error could be as simple as an overdue account that is now paid but is showing up as unpaid on your credit file. As these defaults can remain on your credit file for five years, reporting them as soon as you see them will ensure they're investigated sooner and will hopefully reduce the negative impact it could have on your file.
If you are unsure of how to deal with any errors or issues, you might want to seek the assistance of a credit repair service (such as Princeville Credit Advocates) to clean up your credit file. These services do come at a cost, but you're more likely to resolve the issues quickly and more thoroughly with the help of a professional.
See our guides for more tips on how to remove a default or enquiry from your credit file and how to lodge a dispute to your credit card issuer.
How to keep a good credit file or repair bad credit
Whether you want to protect your finances or already have a bad credit score, there are a few simple steps you can follow to repair your credit history:
- Make your repayments on time. It may seem simple, but always pay your bills on time. If you think you might forget, set up a calendar reminder or auto-payments so that your bills are paid automatically from your debit card account. If you struggle to pay your bill each month, consider requesting that your statement due date is moved closer to your pay day date or get in touch with your issuer to discuss your options rather than having an overdue account.
- Regularly review your statements and credit file. Each time you receive your credit statement, make sure to look over it carefully to ensure there aren't any fraudulent transactions or mistaken transactions listed on there. It's also important to regularly review your credit file to make sure it's in good standing. You should always check your credit file before you apply for another credit card or loan, but you should also be checking your credit history at least once a year to make sure it's on track.
- Seek financial help. If you are having difficulties paying a bill or managing a debt, contact your issuer to discuss financial options (such as payment plans, reduced interest rates or extended due dates) to avoid defaulting on your payments and leaving a negative mark on your file.
Bad credit impacts many Australians. Unfortunately, a missed repayment or ongoing debt can be enough to impact your credit file for years to come. While most credit card issuers won't approve an applicant with bad credit, personal loan and short-term loan options are available in the mean time. Just make sure you compare your options and understand the costs involved before applying. As well as applying for alternatives, it's important to understand how bad credit works and what you can do to get your finances back in control.Back to top