Credit options if you have a bad credit rating

Even if you have a bad credit rating, there are still some credit options available to you.

Having a bad credit score can reduce your chances of approval when applying for a future credit card or loan. Bad credit is often a result of late repayments and defaults on a loan, but can also occur if there's an error on your file.

While most credit card issuers won't approve applicants with a negative credit rating, there are some other credit options available to you. Use this guide to understand what bad credit is, pick up tips for improving your credit file and to compare your financial alternatives if you have bad credit.

Alternatives for applicants with a bad credit rating

Unfortunately, all Australian credit card issuers require card holders to have a good credit history to receive approval. So if you're desperate for a loan but have a bad credit rating, you'll need to look elsewhere for credit alternatives.

For example, you might need to compare short-term loans or  personal loans. Some of these options don't require credit checks, though you will still need to prove some form of income. Keep in mind that these loans often have shorter turnaround periods than credit cards. This means you might be required to repay a short-term loan within 10 weeks rather than 3 to 20 months as you could with some credit cards.

Make sure you compare these factors, as well as the interest rates and other costs involved, before applying. Otherwise, if you want another way to budget and manage your cash, you could also consider a debit or prepaid credit card.

Sunshine Short Term Offer

Sunshine Short Term Offer

  • Centrelink borrowers considered
  • Fast approval service
  • Borrow up to $2,000
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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
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Short-term loan alternatives for applicants with bad credit

Name Product Max. Loan Amount Term of Loan Turnaround Time Costs Product Description
Sunshine Short Term Loans
$2,000
9 weeks
30 Minutes - conditions apply
20% of loan amount + 4% of loan amount each month
Apply online with Sunshine Loans and you could borrow up to $2,000 paid directly into your account. Family Business since 1999.
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
Apply for a short term loan and you could borrow up to $2,000
Ferratum Cash Loans
$1,900
Up to 6 mths
Same Day if approved
20% of borrowed amount + 4% of borrowed amount each month
A small loan from Ferratum lets you borrow up to $1,900 without a credit check
Cash Train Loans
$2,000
10 weeks or 3 months
1 Business Day
20% of principal amount (establishment fee) + 4% monthly charge
Apply for a Cash Train loan and get up to $2,000 sent straight to your bank account. Fast online application

Compare up to 4 providers

What is bad credit?

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.

If your credit file has evidence of missed or late repayments, overdue accounts, large debt and defaults, it's likely that you will have bad credit. Your credit file contains payment defaults dating back five years, so it's important to keep this in mind when applying for a card or any sort of credit. Unfortunately, most credit card providers in Australia do not approve applicants with a bad credit history.

If you're unsure if you have a good or bad credit rating, you can order a copy of your credit file from credit reporting agencies, such as Equifax, Experian or Dun & Bradstreet. In fact, Equifax will provide you with a Equifax Score that you can use to determine whether you have a good or bad credit rating. Your Equifax Score will be a number between 0 and 1200. A "good" credit score is between 622 and 725, a "very good" score is between 726 ad 832 and an "excellent" score falls between 833 and 1200.

Some companies can also help you repair your credit file, usually for a fee. This option could come in handy if you want to increase your chances of loan approval but don't know where to start.

How do you get bad credit?

Bad credit can come as a result of a few things. You only have to forget to pay a utility bill on time once or exceed the limit on your credit card and you could have a black mark placed on your credit file. Similarly, if your power is cut off or your car repossessed, this information is also kept on your credit file for years. Other factors that can have a negative impact on your credit file include overdue accounts, large debts and late credit card repayments.

When you apply for a loan or credit card, the issuer will review your credit history and use the evidence on your credit file as a way to determine whether you're a suitable applicant to approve. If your credit history contains evidence of defaults and missed bills, the bank or institution is going to be less likely to approve you.

How to find out if you have a bad credit file.

The details on your credit report will help you determine whether or not you have bad credit. You can apply for a free credit report once a year through each of the credit reporting agencies in Australia: Equifax, Experian, Dun & Bradstreet or the Tasmanian Collection Service (for Tasmanian residents). The details these agencies have on file can vary, so you may want to request a copy of your credit file from each of them. Alternatively, you could apply for a credit check through a credit repair agency, which may offer additional services for a fee.

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.

Princeville Credit Advocates

How to keep a good credit file or repair bad credit lady looking at her laptop while holding credit card

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:

  • Timely repayments. It may seem simple, but always pay your bills on time. If you're prone to forgetting, 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.
  • Credit repair. Whether you want to repair your credit file yourself or seek the advice of a professional, working to improve your credit file by removing errors, paying down your debt or making timely repayments can help improve your likelihood of approval in the future.
  • 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.
  • Conduct a balance transfer. If you're struggling to repay a debt on your credit card, consider transferring your balance to a credit card with 0% interest for a promotional period. Not only will you pay down your debt faster, you won't have the burden of interest adding to your debt as you pay it down.

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.

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10 Responses to Credit options if you have a bad credit rating

  1. Default Gravatar
    Jackie | July 6, 2016

    I have been late with paying credit cards and home loan. Ive never defaulted on payments but have been late. Im looking into selling my home, clearing my credit card debts and current mortage. This cannot be done until the house is sold and I have the funds to clear the debts. Will I be able to get another mortage straight away to buy another home or shall I have to rent and get my credit rating back on track?

    • Staff
      May | July 22, 2016

      Hi Jackie,

      Thanks for your inquiry. You have come through to finder.com.au we are an Australian financial comparison website and general information service. We are not credit experts and so we can only provide a generalised advice.

      Sorry for the delayed reply. Your credit file contains all the details of credit related information about you which include payment defaults, credit applications (an enquiry will be recorded each time you apply) and a contract for a service like an internet or a mobile phone plan. Keeping your credit file healthy will give you the higher chances of approval when you apply for a mortgage, a personal loan or a credit card.

      So before you apply for another line of credit, it’s best that you get a copy of your credit report first and check your credit rating. If you see that your score is low, it may be a good idea to wait for a while and start improving your credit rating first.

      I hope this has helped.

      Cheers,
      May

  2. Default Gravatar
    Suzy | March 27, 2016

    I have been in the country for a year, working for the 6 months required by most institutions, but do not have a credit score here so am being turned down for loans etc. The bank suggested a credit card to pay off and get a credit score. Is there anyone that is likely to give a credit card to someone with no credit history? would getting a payday loan and paying that off on time create a good credit score? any other suggestions on how to get started on the credit score?

  3. Default Gravatar
    zarav | November 27, 2013

    PLEASE HELP. Can you advise me of a credit card I can apply for even though I have bad credit due to a phone account. I’ve applied for 15 and all said no. I have a great job now and need a credit card ASAP. Just assist me with accessing credit card for person with a default on their credit file.

    • Staff
      Jacob | November 27, 2013

      Hi Zara.

      If you have a default on your credit file, you won’t have much chance of getting approved for a credit card as they are for people with good credit only. Furthermore, if you’ve applied for a number of credit cards in a short space of time, and you’ve been declined in all instances, then this will negatively impact your chances of getting approved into the future.

      You can read more about why credit card applications get declined on this page.

  4. Default Gravatar
    | April 9, 2013

    I am a Discharged Bankrupt, I’m not quite sure what the date of discharge was, possibly 2-3 years ago.
    Is there any Creditor who would give me a Credit Card

    • Staff
      Jacob | April 9, 2013

      Hi Cynthia. Unfortunately their is no definitive answer to this question. You will have to speak to each lender in person to gage your prospects as an applicant. Some lenders may be willing to provide credit if you have a proven history of savings, while others may provide a personal loan to show that you can manage a credit product responsibly. A credit card may not be the best product to start with as one of the requirements is the applicant must have a good credit history. Jacob.

  5. Default Gravatar
    Sungsoo | October 11, 2012

    Hi, I’ve fully paid all of my outstanding balance 1 month before and there are nothing left to pay.
    The credit record will be deleted from my file Jan.2013. In this case, can I get approved from Bank to get credit card? I tried few times but all been declined. I’m bit worry that lender or bank are able to see my previous footprint and it may effect to my future.
    Any ideas or solution to get approved for credit card please?
    Regards,
    Sungsoo

    • Staff
      Jacob | October 11, 2012

      Hi Sungsoo. We spoke to a bank about what people with bad credit should do when looking to get access to credit, and this is what they said. Thanks for your question.

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