How credit cards could help to repair poor credit history
If you have poor credit history and you've struggled to pay off your credit cards in the past, you might believe it will be almost impossible for you to apply for a new credit card.
People with bad credit ratings often already understand the effect this can have on their financial future. It's much harder for them to obtain unsecured loans or even apply for a mortgage. However, you might not have realised it could also impact your insurance policy and the premiums you pay.
Landlords and rental agents will also take a look at your credit history to determine if you've been a bit forgetful about paying your bills in the past. Unfortunately, there are also some employers who will require employees to have a good credit history too.
So if you already have poor credit history records, what can you do to put it right?
If you've tried to look up information online about fixing bad credit, you might have learned a lot about credit scores and various things you can do to raise it which follows the American credit reporting system. In Australia, the equivalent is a Equifax Score.
The Australian credit reporting agency, Equifax records whether you're making your payments on time. It also focuses only on listing 'defaults' if you miss payments or 'judgements' if you've been taken to court by a creditor. Obviously, bankruptcies will also show. It will also focus on how many enquiries you make which are listings that show how much credit you've applied for in the past five years.
If your credit report shows an 'unpaid default', a bank will be very reluctant to approve any credit application at all. This tells them you haven't paid off your overdue bills at all. Yet, if your credit report can show a 'paid default', this is considered a little better in their eyes, even though it still constitutes a poor credit history.
Whenever you use your credit card to pay for purchases, make absolutely sure you repay the amount you spent. It might take you a couple of weeks to pay it down but keep doing this regularly. After a couple of months, you should have statements showing that you're really trying to stay on track with your financial responsibilities.
The next time you need to apply for finance, you already know the lender will do a credit check on you and see those bad credit listings. But your credit card statements with the good payment history could offer the assessor some way to understand that you're really getting your finances back on track.Back to top