How to repair poor credit history using credit cards
Can your credit card help boost your credit rating?
A bad credit rating is likely having an effect on your current financial situation as well as impacting your future credit opportunities. However, there are ways you can improve your credit rating and a weak score now doesn't mean it will stay that way forever. The short answer as to whether you can improve your credit score with a credit card is yes, if you already have one. If you don't already have a credit card however, it will likely be difficult to get one with bad credit.
What is "bad credit"?
In Australia, there are various credit reporting agencies and each has its own way of calculating credit scores.
|Fair / Average||550-624||510-621|
|Weak / Below average||0-549||0-509|
How do I know if I have bad credit?
The first thing to do is to check your credit report and credit score, which you can do for free with finder.com.au. Once you get your credit report (delivered through Experian if you request it through finder), you will be able to see all of the listings on your file. These will include the credit you have applied for in the past five years, your repayment history for the past two years and whether you have defaulted on those accounts. If you've ever been bankrupt or applied for credit but not been approved, this will be listed as well.
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Can I repair my credit rating with credit cards?
The short answer is yes, but the long answer is only if you already have credit cards. This is because getting approved for credit cards when you have bad credit is much more difficult, so you can only do this if you have a credit card/s before you run into bad credit. If this applies to you, here's what to do:
- Make repayments on time. Your repayment history is included in your credit report, so make your credit card repayments a priority. Once your bad credit listings come off your credit report, you'll want plenty of good credit listings, such as on-time repayments, to boost your credit score and help you get approved for whatever you need.
- Consider lowering your limit. If your credit limit/s are excessive and you are not using them, consider lowering them. The total of your credit limits affects your credit score and lowering them can improve your score.
- If you have multiple cards, consider consolidating them. Having multiple lines of unsecured credit can have a negative impact on your credit score, so consolidating your cards can have a positive impact on your score. To do this, focus on repaying down the balance of one card to close it and just leave your other card/s open. To pay off your current debt with low or no interest for a period of time, you could consider a balance transfer.
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