If anyone thought having bad credit meant people were merely unable to purchase big ticket items such as a home or a business – they are sorely mistaken. As our credit repair clients would surely testify, bad credit history permeates through every area of a person’s life, to the point where they can’t even get a mobile phone on a plan. These people, through denial of mainstream credit are forced to seek alternative credit often at higher interest rates – perpetuating the debt cycle even further. This has parallels with a recent study which reports that the high cost of access to basic financial services particularly in remote areas are forcing more and more towards fringe credit as well.

By Graham Doessel, Founder and CEO of MyCRA Credit Rating Repairs and www.fixmybadcredit.com.au.

An article published in the Sydney Morning Herald today, titled More of us lacking access to banks revealed the study results – more than 2.9 million adults do not have adequate access to day-to-day financial products such as a basic banking account, car insurance or even a credit card.

Here is an excerpt from the same story featured in WA Today, Titled More Australians can’t access money: report :

The research by the Centre for Social Impact – backed by the University of Western Australia – shows the ability to secure as much as $3000 in funds for an emergency through the mainstream financial system is becoming increasingly out-of-reach for Australians.

Instead, more people are relying on family or friends or turning to fringe credit products, such as payday lenders, who regularly charge substantially higher interest rates than banks.

Such products have seen a surge in uptake in recent years….

NAB chief executive Cameron Clyne accepted the banking industry was partly to blame, conceding it needed to lift its game by providing affordable products to more people.

”The absence of access to mainstream financial services does preclude people from advancing socially and economically,” he said.

”Often it’s the unexpected expenses

[such as] if the car breaks down or someone needs to get to a job interview.
“There’s an obligation for the banking system to improve financial inclusion.”

Financial inclusion is a big issue. Many people need a fair go – and the chance to borrow small amounts of money at reasonable rates which they might have a chance at paying back, allowing them to actually move forward in life.

Parallels for bad credit clients

In our race to ensure we are not throwing money at people when they already can’t handle the credit they have – we have adopted a policy of excluding people who present with bad credit from mainstream lenders. This is responsible lending, but where do those people turn to in emergency situations? The very same places the people surveyed in the WA report do – family, friends or fringe credit.

It seems a shame to throw people who are already struggling with debt into a ‘debt trap’ of borrowing from pay-day lenders and the like.

One terrific favour we can do for people we meet who are ‘on the fringe’, struggling with bad credit, is point them in the direction of financial counselling – so that when they are turned away from mainstream credit, they can be given something positive to pull them out of the ‘debt trap’ and deliver them back on the road to financial security.

And of course, if there is any doubt about whether they should have the bad credit in the first place – then referring them for assessment for credit repair would be the ultimate gift. If they are able to remove the negative history from their credit file which shouldn’t be there, then they have the best chance at a fresh start with credit, and a normal life.