It can be a serious matter to receive a poor credit rating and be black-marked as a poor credit risk, especially if you are looking to take out a mortgage or loan in the future.
Having a bad credit rating means you are a high risk to lending institutions who will moderate that risk by charging you higher interest rates or refusing your application for a loan all together.
What are bad credit loans?
Bad credit loans are provided particularly for people with impaired credit files and bad credit histories. They are also provided to help first home buyers, 457 visa holders and the self-employed as they are considered high risk groups to lenders.
Bad credit loan brokers are able to find you some of the best personal loans and car loans on the market tailored for those with bad credit histories. If you have impaired credit files, or a poor credit history, a qualified loan broker may be able to provide some assistance.
Bad credit loan brokers are a dime a dozen and a search of the internet will reveal plenty of loans that can be applied for online. These lenders are often perceived to be “dodgy” due to stories of incredibly high interest rates and repayments. The truth is that you may have no other choice than to go with a high interest rate loan if you do have a bad credit history but you should avoid a loan if you are not certain of your ability to repay this loan on time or earlier. If you feel more comfortable doing so you may apply for a personal loan at a major bank but keep in mind that their restrictions on who can take out a loan are more stringent than your average bad credit loan provider and it may result in your application being rejected.
Here are some tips to keep in mind when taking out your loan to avoid impairing your credit rating any further:
- Get an idea of how much you can safely borrow by using a personal loan calculator
- Once you know how large the payments will be factor them into your weekly budget to make sure you can afford the repayments
- If there is any doubt that you will be able to afford the repayments seriously consider if taking out the loan is in your best interests
- Choose the credit providers you apply for wisely as if you apply and are rejected from a few lenders this will damage your rating even further
- Save up an emergency reserve of funds that you can turn to if circumstances change to avoid defaulting on your loan
What is a bad credit rating?
Your credit rating is made up of an assessment of several different factors. These include any outstanding debts or repayments you have not made, previous applications for credit and their status as well as the types of credit and lenders you have applied to.
Common practices that damage a credit rating include:
- missing payments
- making late payments
- skipping payments
- exceeding card limits
- being generally careless about your bills
To stay out of the red-tape and not fall into bad credit habits, experts recommend that Australian's conduct regular reviews of their credit payment history.
What is comprehensive credit reporting?
From March 2014, the Australian credit system began to report credit history more comprehensively. Under the previous arrangement, it was not been possible for so called good credit to balance any negative events, no matter how small they may be. Even with a secured bad credit loan, your negligence would still be reported to the credit bureaus.
This is no longer the case as comprehensive credit reporting provides a more holistic view of your past payments. This is may be beneficial to people with a bad credit rating who may have defaulted on a loan but have kept up with bill repayments regularly for example.