What To Do If I've Got Bad Credit

What to do if you’ve got bad credit

Hey, the first step is understanding what your credit score is, and you’ve made it this far… so you want to find out! Check our article here on ‘What is My Credit Score & Why Does It Matter?’.

Credit scores can be measured differently depending on which credit bureau you turn too to check your score. At Save My Bacon, we use kiwi-credit bureaus Centrix and Equifax when our customers put through an application with us, to check their financial responsibility (along with some other requirements). We also report customer repayment history so making your payments on time has can improve your credit score – cool!

You can find out your score by putting through an application with Centrix, and soon Save My Bacon customers will be able to check their Centrix credit scores via our app ! Stay tuned!...

Understanding Credit Score Tiers

Below is an outline of the Centrix credit score tiers, and the likely impact they’ll have on your ability to apply for financial services in the future (credit).

Score Range*	Traditional Risk Band Name	% Population	What it means for the you
>845	Excellent	20	Should be eligible for the best credit cards, loans and utility services (but there are no guarantees)
769 – 844	Very Good	20	Should be eligible for most credit cards, loans and utility services
650 – 768	Average	30	Should be eligible for standard credit cards, loans and utility services offers
495 – 649	Fair	20	Might get credit cards, loans and utility services but these may have additional conditions
<495	Poor	10	Most likely to be rejected for most credit card or loan facilities

Got bad credit? Don’t panic!

If you’ve got a below average (under 650 points) credit score, don’t worry! First things first, check for any errors on your credit file and make sure everything looks as it should. Contact Centrix (or your other credit bureau) and they will get back to you about your request within 20 days.

If there are no surprises in there, and everything looks correct then you need to understand the factors contributing to your score:

• Your payment history – whether you pay your bills on time, how many payments your have missed in the past and how likely you are to make your payments on time
• Whether you have any dishonours – if you have failed to make a payment to a company due to insufficient funds
• Whether you have any defaults – if you have an outstanding debt equal to over $125 overdue by more than 30 days
• How long you’ve been using credit – the credit limits you already have open on different cards, loans and how long you’ve been using them
• The mix of credit card types you’ve had and are currently using – having a lot of maxed out credit cards is not great for your score, but having a healthy number of cards and balance can help
• Number of credit requests – The number of recent credit accounts you’ve opened and the number of applications you’ve made

What does it mean if I have bad credit?

If you have a bad credit rating, it really could impact your financial service options and access to credit, including the below roadblocks:

• Rejection for loans and different credit limits – these can include mortgages, car loans, personal loans, student loans and credit cards
• Difficulty securing a rental application – lots of landlords conduct credit searches on potential tenants to assess their payment history and financial responsibility, to check you’ll be able to make your rental payments
• Additional requirements when securing utilities contracts – including gas, electricity and water, you may have higher interest rates and be required to make a deposit
• Difficulty getting a new phone contract – most telecoms companies run credit checks before offering contracts
• Issues securing employment – if you are bankrupt your score will show as 0, and if you have a very poor credit score, then companies may have policies that mean they can’t hire you

How Do I Fix My Bad Credit Score?

Pay your bills on time!

This is the most important part of improving and maintaining your credit score! Your repayment information impacts your score the most, so its essential to understand your bills and when they are due to be paid.

A good way to keep on top of this is to schedule your bills to come out straight after payday, around the same time so you know how much you need for the rest of the month. Or create a budget so you know what is coming out of your account when, preventing you from overspending and thus missing a payment.

Pay off your debts and keep balances on credit cards & other revolving debt low

When you apply for finance or credit cards, the potential lender or bank will run a credit check to see how much credit you have vs. how much you have used. If you had some cards that are nearly maxed out, or close to the max balance, your lender may view this as excessive spending for how much balance you have available.

Try to keep your cards balance limits under control, or try and secure the right amount of credit limit for you so you won’t max out the balance. Struggle with shopping online and overspending? Check out our article here for how to save money when shopping online in 2020.

Don’t apply for multiple cards or loans within a short space of time

When you apply for a credit card or loan, a request is made to view your credit information. If you open too many accounts or have too many requests in a short space of time, this could negatively impact your credit score.

 

Keep credit cards open

Leaving credit cards open with relatively low balances can work in your favour, showing potential lenders that you can use credit and pay it back! It can also be handy to have credit cards with available balances ready to use.

Understand how long data remains on your Centrix Credit File

To add some context around trying to improve your score, its good to understand how long information can stay on your file for each infringement.

Credit application information	5 years from date of application
Payment default information	5 years from date of default
Judgment information	5 years from date of judgment
Single bankruptcy	4 years from date of discharge from bankruptcy
Single entry to no asset procedure	4 years from date of discharge from no asset procedure
Multiple insolvency events (as provided in the Insolvency Act 2006, s.449A)	Indefinitely
Previous enquiry record	4 years from date of enquiry
Serious credit infringement information	5 years from date of report

Once information is in your credit file, it is only ever removed if proved incorrect, so be sure to pay your bills on time! Prevention is better than cure!