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What Is A Bad Credit Score?

Having bad credit isn't an ideal situation to be in, but what is a bad credit score? Find out everything you need to know here and get on top of your finances!
what is a bad credit score?

Many people have very little understanding of what a credit score is and what impact it can have on their life, yet it plays a huge role in your ability to borrow money from lenders and take out a loan. Having a bad credit score can affect you for a long period of time, limiting your ability to borrow money and making you appear as a risk to potential lenders. Here’s everything you need to know about your credit score, including what is a bad credit score and what you can do about it.

What Is A Bad Credit Score?

Wondering what is a bad credit score? In order to understand exactly what a bad credit score is, let’s first take a look at your credit score and how what it’s made up of. Your credit score is a number calculated based on your credit report. It determines how reliable you are as a borrower, and can make all the difference when it comes to taking out a loan. 

Your credit score will sit between zero and 1200, depending on the credit reporting agency you go through. There are three main ones in Australia:

  1. Equifax
  2. Experian
  3. Illion

Each one uses different credit score ranges and different ways of calculating your credit score. Across all three agencies, the higher your score the better. You’re considered less of a risk to a potential lender, making it easier for you to borrow money.

So, what is a bad credit score? Once again this depends on the agency you go through, but as a general rule, if it’s below about 550, it’s classified as a bad credit score. If you’re looking to understand what is a bad credit score, then it’s important to consider the different factors that make up your credit score.

make repayments on time

What Makes Up Your Credit Score?

Every credit reporting agency is different when it comes to the factors that affect your credit score, however, there are some things that are common for all:

  • Repayment history: if you’ve missed loan repayments or paid them late, this will be marked as a listing on your credit score and bring it down. Likewise, if you meet the repayments on time, this will reflect well on your credit score.
  • Credit applications: each credit application you make is marked on your credit file. If you are truly looking around for the best deal, make the enquiries close together, so they only count as one. If you spread them out, it will bring down your score.
  • Defaults, bankruptcies, court judgments: if you’ve ever failed to pay back a debt, this will be noted on your credit file and make aware to future lenders. These negative listings can stay on your credit file for up to five years.
  • Length of your credit history: The longer your credit history and the more different types of credit you have taken out in the past, the better your credit score will be. It reflects positively on your lending ability.
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What To Do With A Bad Credit History?

If you do find yourself in a position of bad credit, you can work to change it around.

By changing your financial habits and ensuring all your debts are paid off, or the repayments being made on time, you have the opportunity to turn your credit score around.

Depending on the negative listings on your report, this can take time and hard work. But it will make it much easier to take out loans in the long term and help you out financially. 

Getting A Loan With A Bad Credit Score

Now that you know what is a bad credit score, you might be wondering whether or not you’re able to still take out a loan with one. Thankfully, there are lenders out there who don’t pay attention to your credit score when it comes to assessing you for a loan.

Instead, they take a look at where you are financially, and the likelihood of you being able to pay back the loan. This generally involves looking at some past bank statements to see both the incoming and outgoing expenses.

Bad credit loans are a great option if you find yourself in a position of bad credit.

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Getting A Loan Today

Are you in a position of bad credit and wanting to take out a loan? Contact the experienced professionals at Bad Credit Loans today. We provide bad credit loans for most situations, from personal loans to business loans, low doc loans and small loans. You can find the right option for your circumstances and get the money you need today.