Credit – friend or foe? Yes you should take advantage of credit, and we show you how to do that without blowing out repayments, and preventing a bad credit history.
By Graham Doessel, Founder and CEO of MyCRA Credit Rating Repairs and www.fixmybadcredit.com.au.
It is no secret that in this day and age many people are struggling with credit.
Currently we are seeing lots of people running into trouble with their credit rating and the trouble sticks for 5 -7 years
You could be forgiven for thinking that credit is the enemy…
But we need to develop the ethos that credit is not something that is granted, it is something that is earnt. At one point banks were practically throwing money at us. Now it’s tough and you have to prove yourself.
There is absolutely nothing wrong with using credit provided you make it work for you.
In fact, if you have wondered ‘credit – friend or foe?’ consider what having no credit history will do for your ability to obtain credit. Not having a credit repayment history in this day and age can be just as difficult as having a bad credit rating when it comes to getting finance – especially a home loan.
Where people come unstuck with credit is getting to a stage where they are forever chasing their tail with repayments, falling behind. Or getting blasé about repayments and not understanding what the consequences can be.
Credit can be useful provided you make it work for YOU.
If you can’t afford it now you can have the privilege of paying for it later – but understand that you will pay at some point. So if you don’t make your payments on time now – your credit file – your ability to take out new credit – will suffer for years to come.
A bit about how a bad credit rating originates…
Payments on any bills which are more than 60 days late can be listed as a ‘default’ on your credit file.
This default can remain on your credit rating for 5 years, and can mean you are refused credit for this time. Even if the account was later paid, the credit reporting agency generally does not remove the default but can mark it as paid.
Even defaults that you have paid still show on your credit report, and are considered bad credit history by most lenders. It is extremely important to keep a clear credit file because the repercussions will be felt for 5 years.
Here are our 6 credit success tips…
1. DO USE CREDIT: Having no credit history means there is nothing to calculate and the risk appears high to lenders. Start by borrowing something small. Repaying mobile phone plans, internet accounts, or store credit on time will appeal to anyone checking your credit score. Smaller purchases paid correctly contribute to approval for larger loans such as homes, vehicles and businesses in the future because they show a person’s ability to repay.
2. MAKE REPAYMENTS ON TIME: Repay any bills received by the due date. Repay over the minimum amount required on credit cards. If you are having trouble paying on time, contact the creditor as they may be able to work out a payment plan rather than listing the non- payment as a default.
3. HAVE A STABLE ADDRESS: Lenders like to see stability. Furthermore, defaults are easy to come by when bills are sent to the wrong address. If you do travel frequently, consider a trusted family member’s address for all bills.
4. APPLY FOR CREDIT WITH CARE: You should only apply for credit if you feel you have a very good chance of being approved. Declined credit applications on a person’s file can hinder their chances of obtaining a loan. Likewise, you should only apply for credit you have full intention of pursuing. Every application is noted but does not stipulate whether it was approved or not. If you go shopping for credit and apply everywhere – it may look like you were declined everywhere.
5. CHECK YOUR CREDIT FILE REGULARLY: You should check your credit file before you need to apply for credit. That way if there are any problems you can sort it out while there is no urgency, and save yourself embarrassment and disappointment from having credit declined. It is free once per year from the credit reporting agencies.
6. DON’T LEAVE DEFAULTS TOO LATE: If there are defaults, don’t put up with them for 5 years – you may be suitable for credit repair. People can check with a credit file repairer if they can be removed.
What about credit repair…
Begin by obtaining a credit report – which you are entitled to do for free every 12 months via the major credit reporting agencies Veda Advantage, Dun & Bradstreet and Tasmanian Collection Service.
If you find a default, writ or Judgment on your credit file which you believe is there unfairly, unjustly or just shouldn’t be there at all – it may be possible to have it removed.
Credit repair is a difficult process. Time and again people are disheartened from trying to deal with creditors themselves to have the default, writ or judgment removed from their file. Most are told that default listings never get removed but can be marked as paid.
Unfortunately, this is not enough to ensure credit is obtained in this current economic market. So basically those black marks mean you are stuck with a bad credit rating for 5-7 years, unable to borrow for homes, cars, businesses and take out simple accounts like mobile phone plans.
Then the key is to establish a good track record on your credit file, using the above 6 credit success tips.
If you need help with repairing your bad credit history, contact MyCRA Credit Rating Repairs on 1300 667 218 or visit our main website www.mycra.com.au.