Aussies know this all too well: If our Equifax credit score is 509 and below, we have a poor credit score. For Experian users, a poor score is anything from 549 and below. Sounds familiar? Well, you may still be able to get a loan – read on:
Your score basically represents your creditworthiness, and having a lower score means you’re a risk to creditors. But don’t despair as there are creditors who are willing to extend loans to you with whatever score you have.
These loans are commonly referred to as bad credit loans, and it is pretty important to learn more about them before applying.
What Is a Bad Credit Score In Australia?
In Australia, there are several credit reporting bureaus, including Experian, Equifax, Illion, and Tasmanian Collection Service.
Equifax is the largest agency, and its maximum score is 1200. Any score in the range of 833 to 1,200 is excellent, 726–832 is very good, 622–725 is good, 510–621 is fair/average, and 0–509 is weak.
Basically, you have a bad credit score when yours fall in the range of 0 to 509. Things that affect your score negatively, include defaults, debt agreements, excessive credit inquiries, late payments, and bankruptcies.
How Can Bad Credit Affect Me?
Ideally, when you apply for any type of loan, creditors will want to check your credit score. Basically, your score determines whether you’re approved or not, and it also determines the amount you get or your credit limit.
So, if you have bad credit, creditors consider you a risk. This means you won’t get the same treatment as people with good credit. The conditions you get might be stricter, and interest rates and fees might be higher.
In a worst-case scenario, you’ll get rejections for your applications due to a poor credit score.
Having bad credit also makes you a target for loan sharks and other unscrupulous creditors. In this case, such lenders know you’re desperate to get money, and they can give attractive offers, which can really hurt your financial health if you don’t think everything through.
Are There Any Loans for Poor Credit?
Poor credit affects your ability to access credit, but there are plenty of options for you. There are personal loans, home loans and credit cards that you can qualify for once you apply. Just be sure the information and details you provide during the application are valid.
With credit cards, it can be hard to get approved. You’ll need to spend some time to improve your score before applying for a card. Since you might be a target for loan sharks, be sure to work with reputable and registered credit providers only.
How Do Bad Credit Loans Work?
Bad credit loans are similar to standard personal loans. The only difference is that they have higher fees and interest rates. They are more expensive because creditors want to reduce the risk of lending money to people with poor credit.
Apart from fees and rates, you’re likely to get the same loan terms as other personal loan options. Just be sure to get as much information from the lender before applying for the loan.
How Can I Get a Loan with Bad Credit?
If you have bad credit, the first step is to get a copy of your report just to ensure everything is accurate. In some rare cases, the poor score can be as a result of mistakes. Review the report to ensure everything is correct.
You then need to find lenders that offer bad credit loans and compare them to find the best rates and fees for your score. Just because you have a poor score doesn’t mean you should accept the first offer you get.
Also, be sure you meet the requirements of the lender. You must be at least 18 years old, and an Australian citizen. Be sure to provide your income details, identify documents, and employer’s details. The more information you provide, the better.
You can expect to get a response from creditors within 24 to 72 hours after applying. They can also request for more information if needed.
It’s true that having bad credit can limit your loan options, but it doesn’t lock you out. There are still options catered to your needs, and it’s just a matter of comparing bad credit loans to pick the best deal.
Bad credit loans have high costs, and the more you borrow the higher the interest rate. Be sure to get expert advice before you apply for the loan. If you get approved, stay on top of repayments to protect your score.