You might have tried applying for a new loan or credit card account, but the lender or banker will not approve it. Chances are, you have a bad credit score. Your loan history and repayment history might have affected your loan application.
You need the money, and you’re frustrated with how to get approved for that loan application. Do not lose hope. There are still ways to fix your bad solvency rate. This article will tackle how you can fix it.
Understanding Your Credit Report
Your financial report contains your financial history and your past and present payment of debts. Bureaus use your financial history to know your borrowing risk, which is your credit score.
A few late payments or a payment default might have affected your score. Debt agreements and your bankruptcy will also be listed in your file, which can then result in a low or bad solvency rate.
Scores that are between 0 and 459 are generally below average and weak solvency rates. Having a low or bad solvency rate will then send a red flag to the lender or bank if you apply for a loan. Having a bad solvency rate means that there is a high chance that your loan application will be rejected. You will also run the risk of getting a loan from loan sharks with high-interest rates.
The listings that leave you in bad financial report are the following:
- Bankruptcy – listed in your report for two years
- Debt agreements – listed for five years
- Defaults – listed for five to seven years
- Writs, court judgments, and summons – listed for five years
- Missed and late payments – listed for two years
- Multiple loan inquiries in a short period – listed for five years
Can you still get a loan with a bad score?
Yes, you can! Although a bad solvency rate will lessen the chances of your loan application being accepted, this does not mean that you will have no other options. You can still take out a personal loan and home loans.
It is still possible for you to take out a personal loan even if you have a bad lending capacity. Some lenders in Australia will let you borrow up to $10,000. You can also consider getting a short-term loan if you need instant cash with fast approval. However, since you have a bad lending capacity, the lender might charge you with a high-interest rate.
As for home loans, there are still lenders who will approve your home loan application even if you have a bad lending capacity. Ask help from a mortgage broker to look for lenders that suit your financial status.
How to fix your bad score?
Fixing your borrowing capacity is not easy and may take up a significant amount of your time, and require a long period of financial responsibility on your part. With that mentioned, here are ways to fix your bad lending capacity.
1. Change errors in your credit report
Get a copy of your report and check the information and financial history stipulated therein. See if there are errors in the entries in your report because some reporting agencies might have made errors in your report.
The most common mistake is that your family member’s loan or stranger’s loan might have been listed to your report because of very similar names. Your income might have typographical errors, or debt may have been entered twice.
To have this error fixed, contact your reporting agency and ask them to fix the mistakes right away. Your lending capacity will probably improve if you have these errors changed.
2. Pay bills on time
This strategy is the most obvious answer when people ask how to improve their solvency rate. Your borrowing capacity will improve if you have consistent and on-time payments on record. Staying on top of your loan repayments will surely help improve your borrowing capacity and will show that your financial discipline has grown.
Paying bills on time is also essential, especially if one of your debts is more than $150 since nonpayment or late payment in paying such debt can result in default in your financial report for 60 days.
A strategy in paying bills on time is consolidating all your loan bills so that they will be paid only on one day, and you will be sure that you will not miss a paying day. Another strategy is to set up an automatic paying system with your employer or bank account.
If you do not like the two strategies mentioned above, then if you have multiple loans, budget your income and pay these loans one by one. The best technique is to pay off the loan that has the highest interest rate. If you have leftover money, then work on paying off your other debts to lessen them.
3. Avoid making multiple loan application
Having multiple charge card applications will indicate that you are under a financial blunder and that you might not be able to pay off one of your affinity card loans because of your financial status. But if you want to have a charge card, then do not make applications too often in a short period.
4. Completely cancel your credit card
Having a charge card might be one of the reasons why you are drowning in too much debt since you will be tempted to swipe the card whenever you make a big-ticket purchase.
Make sure to completely close down your account so that your borrowing capacity will not be affected by the account anymore.
5. Get help
Doing all these things by yourself can be torturing and exhausting. It is good to ask for help from a financial counselor. These people will also help you repair your solvency rate and keep your financial stability back on track.
Discipline yourself to fix your bad lending score. Resolve any financial problems you might have using the tips mentioned above. Look for a solver or financial counselor in your area at creditsolvers.com.au to help you in fixing your score. Maintain proper financial habits, and you will be sure that your rating will be better than what it was before.