Do you wish to get a loan but are unable to get it? Getting stuck in a bad credit cycle can prove detrimental, especially if you plan to apply for loans. Banks and financial institutions may often deem you unfit for financial assistance if you have a poor credit score.
However, the apprehension associated with the term is far more severe. Bad credit is not permanent. It can be resolved using several methods. Alternatively, if you urgently need assistance, Australia is home to renowned financial institutions offering bad credit personal loans. They will help you with loans even if you have a bad credit score.
A credit score is an industry-accepted parameter used to check the “creditworthiness” of a borrower. It is the single standard metric on which your loan application depends. Not to mention, it also decides your eligibility for credit cards.
Your credit score increases when you make timely payments and have no write-offs to your name. Failure to adhere to these can significantly impact your credit.
Here are some points that will help you understand the underlying causes of bad credit. It will also help you seek out solutions to the problems.
● Delayed Payments
Whether you are paying the accumulated bill on your credit card, or the EMI of your new car, ensure that you send timely payments to the concerned authorities. Even a payment as late as 30 days can ruin your credit score.
Furthermore, knowingly or unknowingly, consistently delaying your payments will push your credit score downward.
● Loan Defaulting
Loan defaulting has been common in Australia, especially with the onset of the pandemic. Although banks have granted an extension, there is still an estimated $8.7 billion worth of debts, as claimed by a bank.
Lenders will mark you as a loan defaulter if you have missed more than one payment. The institution usually waits till the end of the month, after which it forwards the information to the credit bureaus, impacting your overall credit score.
● The Solutions
Having a bad credit score may not always be intentional. For example, you could miss the payment date or be preoccupied with a significant life event. Irrespective of the reasons, here are some ways to improve your credit score.
● Set up Auto Payments
Perhaps the most effective solution, automatic payments, ensures that you do not need to worry every month. Set up an auto payment method from your account and ensure that you have sufficient funds every month.
● Inculcate a Habit of Budgeting
It is easy to miss out on loan payments because of reckless spending. Funds in your account are vital, especially when you have taken out a loan. Strive to ease your monthly payments and pay off the loans in small denominations.
However, it might take for these habits to come into effect and make an impact on your credit score. Meanwhile, you can use bad credit personal loans from various sources to supplement your needs and gradually improve your spending habits.
Bad credit is not the end of the road. It acts as a teachable moment to help you handle your finances better. It is better to commit to healthy spending habits in the future.
But for personal expenses, it is always recommended to rely on loans. Dipping into your savings would mean you have no money for emergencies.