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How do I know if I have bad credit?

If your score is below 550, you likely have bad credit. Find out how it happens and what you can do to fix it.

Your credit report contains a range of information that lenders use to assess your suitability for a loan. It’s like a personal dossier with records of all the loans you have applied for, taken out, paid off or defaulted on. The information on your credit report is reflected in a credit score, which lenders can use to determine whether you're a high risk applicant.

You can use this guide to understand what is considered bad credit and a low credit score, plus what you can do to improve your credit history.

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What is “bad credit”?

Bad credit is not a completely fixed term, but it generally means you have a negative listing or other risky behaviour recorded on your credit file. This could include information about your current debts, repayment history, previous credit applications, defaults and credit judgements are all listed on your credit history.

For example, a single credit application will not put you in the “bad credit” category, but several applications within a short space of time might. Other listings such as defaults and bankruptcies will put you in the “bad credit” category, as will late repayments.

How do I know if my credit is bad?

You can check if you have good or bad credit by getting a copy of your credit report and credit score. You can access your Experian report for free with finder. Credit scores between 0 - 550 are considered low and are an indicator of bad credit. If you have a low score, your credit report may include evidence of missed payments, defaults, credit judgements and other black marks. You can learn more about which listings could lead to bad credit below.

What does my credit score mean?

Each credit bureau has a different scoring system, for example, an Experian Score will be a number between 0 and 1,000 and a credit score from credit reporting bureau Equifax will be a number between 0 and 1,200. The lower your score, the more likely it is that you have bad credit. You can compare the credit score grades below.

Credit band Experian Equifax
Excellent 800-1000 833-1200
Very good 700-799 726-832
Good 625-699 622-725
Fair / Average 550-624 510-621
Weak / Below average 0-549 0-509

What listings should I look out for on my credit file?

Here are some credit listings that you should look out for on your credit file:

  • Payment history information. All active ongoing payments are listed. If you have any missed or late repayments it may lower your credit score.
  • Credit enquiries. Credit enquires, or loan applications, are not necessarily bad. However, having numerous enquiries listed in a short period of time can be. Generally, applying for credit once every three months will not contribute to a lower score.
  • Overdue accounts listed as a payment default. Debts higher than $150 that are more than 60 days late are considered a defaulted payment. Once defaults are paid the listing should change to represent this but the default will remain on your credit file for five years.
  • Writs and summons. Any record of being summoned to court due to a debt or financial issue will be listed on your credit file. This can happen if you can’t settle the debt directly with the creditor.
  • Court judgements. A record of the outcome of any court cases relating to your debts.
  • Bankruptcy information. This will be listed if you enter into bankruptcy.
  • Overdue accounts listed as a clearout or serious credit infringement. Serious credit infringements are defaults that are not paid off. The creditor must make multiple attempts to contact you at your address without success before they can list a serious credit infringement.

What else can negatively affect my credit?

It’s not only unpaid loans or court summons that will negatively affect your credit. Here are some other factors to consider when trying to understand your credit file:

  • High credit amounts. Borrowing a high loan amount or having a high credit limit can have a negative impact on your credit file. This is because the amount you have used of that limit isn’t listed, only the limit itself. What you use the loan for will also be considered.
  • Multiple loans. Having a few different loans is generally okay, but having a lot of little loans will have a negative effect on your credit file. Try to only use credit when absolutely necessary.
  • Multiple credit listings in a short space of time. Applying for or taking out multiple loans or credit cards in a fairly short period of time will have a negative impact on your file.
  • Regularly moving house or changing employment. Change in itself is not necessarily bad, but the short period of time and the irregularity will have a negative impact on your file.
  • Types of loans. The type of loan or credit you take out can negatively affect your credit file. For example, a personal loan may be seen as riskier than a credit card.
  • Age of your credit file. The longer you have had your credit file, the more accurately your behaviour can be predicted. By having little or no credit history, there is limited information on which to judge your creditworthiness.

How can I improve my bad credit?

  • Check your credit report. Ordering your credit report is the first step, which you can do for free with finder. You'll also receive notifications whenever anything on your credit report changes, so you can stay on top of your finances.
  • Follow our 5 tips. There are five key steps to take to improve your credit rating. Our credit improvement guide outlines everything you need to know and provides actionable steps.

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