How To Rid Yourself Of A Bad Credit Rating

16th OF May 2011

By Anthony Bell, Finance Expert
www.bellpartners.com

Perhaps you didn't pay your mobile when you were younger, or you went abroad for three years and left your electricity bill unpaid. How do you get your credit rating back in check? Also, what does a bad credit rating mean? And how will not paying your mobile bill (and incurring a bad credit rating) affect you later on in life?

Having a good credit rating long term is dependent on you having good financial management so that defaults and late payments don’t happen. Now that the obvious statement is out of the way, here’s what to do if you don’t currently have a squeaky clean credit record:

Get a copy of your current credit record. It can be obtained at www.mycreditfile.com.au If you’re in a hurry, you can order one straight away, or if you’re prepared to wait, there’s one that can take a week or two, but is free.
Review your credit history. If there are errors, assemble any information that assists your claim, and contact the credit reporting agency (for example, Veda Advantage) and the institution who lodged the report to have it corrected. If you did forget to pay a power bill or credit card statement, and it’s still owed, contact the company you owe, make an arrangement to pay it, and request that its rectification be put on your record.
More weight is given to those assessing your credit record to newer transactions. If you were late on your phone bill a couple of times 4 years ago, but have been clean since, you should still be ok.
If you’ve only just started getting your credit back up and running, consider applying for something like a credit card and being ultra careful to be on time with your payments. This will show on your record, and being the newest entry, will be more important.

The ultimate healer of credit ratings is time. For example, after 7 years, a bankruptcy is removed from your record. The more time moves on, and the cleaner you keep your record over that time, the better.

Your credit record is important. It’s how any prospective lender will assess your record in meeting your financial commitments. That’s why it’s so important to know what is on it, and take action to clean it up as soon as you can.

Also beware of making too many credit applications. If a lender sees you have applied for a lot of loans in a short amount of time, they take that to mean that you have been rejected for all of those applications. Be a bit selective in your applications. For example, if you are looking at home loans, don’t apply at every bank you talk to. This is where a mortgage broker can also be a great help, as they will advise on the best loan, meaning one application rather than multiple ones.

Finally, once your record is looking healthier, keep it that way! Use some basic disciplines such as budgeting and keeping a monthly record of your bills and when they’re due so you can keep on top of your finances. If you do run into trouble, talk to your creditors. In the main, they’d rather work with you than make your life difficult.