Have you had a previous credit issue that has been hanging over your head, and you are not sure what to do? Do not despair. It is more common than you think and there are ways to mitigate the issues when you are applying for credit.
Firstly, you need to get to the bottom of your credit problems. So here are some suggestions from the team at yesapproved.com.au.
Request a copy of your Credit Report.
If you have been issued notice of a default, writ or similar or a just curious about your credit score; then you need to request a copy of your Credit Report. The Report contains your Credit activity and Financial performance. It reflects your lending enquiries, credit performance as well as your personal information.
You can request a free copy of your Report from a Credit Reporting Agency such as Equifax.
Since the introduction of Comprehensive Credit Reporting (CCR), many Lenders base their risk assessment on your Credit Score. This Score is an indication of your financial performance (past and present). The Higher the score, the better. And to improve your score you need to address any credit issues reflected on the Report, be it overdue payments, defaults or overall activity.
Communicate with the Creditor
If you have a received a copy of your Credit Report and discover a Credit Default then we would suggest you make contact with the Creditor to discuss the situation. And make arrangements to repay the debt. Do not ignore it!
Understand the circumstances behind the lodgement
The biggest mistake you can make when it comes to current or past credit issues, is to ignore them and expect them to just go away. The problem needs to be addressed. Understanding the circumstances behind the default, writ or judgment being lodged on your credit file is the first step. Was it because you did not make your repayments? Is it an error on the Creditor’s behalf, or is the debt being disputed?
If the default was issued because you simply did not make your repayments then it may be difficult to get it removed by the Creditor. Continuing to avoid repaying the debt may result in it getting passed on to a Credit Recovery Agency (such as CreditCorp), who will continue to follow up payment. It may be more practical to discuss the issue with the original Creditor and come to an agreement to make payment.
The Creditor may have lodged the default without cause or good reason. This is rare. If this is the case then you should discuss this with the Creditor immediately. If they do not agree to remove the lodgement then you may have to discuss it further with your legal advisor or approach a Credit Repair Agency such as Credit Fix Solutions.
If the lodgement is currently in dispute, then you may need to consult a financial or legal advisor about the debt. Continue to communicate with the Creditor.
Now you understand the reasons for the default being issued, take action. To improve your Credit Score, you need to repay the debt or get it removed. Most reputable Creditors will help you through your situation.
Get on top of the debt
Make it a priority to repay the debt or try and negotiate a lump sum payout. Quite often, the Creditor will be open to negotiating the debt down if full payment can be made in one payment. This may help you reduce the overall amount payable, and it helps the Creditor clear up the debt off their ledger. Do not be afraid to ask for a discount on the value of the debt.
If the Lender agrees to a reduced, lump sum payment then be sure to get it in writing and meet the payment deadline.
Avoid Pay Day Lenders
If you are looking for ways to repay the loan, then avoid the option of payday lenders. A pay day lender issues Small Amount Credit Contracts (SACC) and they can be expensive. Consider cutting back on your day-to-day expenses and repay from your savings. Pay Day Lender loans can significantly impact on your Credit Score, and Lenders do not like to see these types of enquiries on your Credit Report.
What action will the Creditor take if you do not repay?
Like most things, prevention is the best remedy. You should always strive to make the repayments on your debts and loans. If you are in financial distress, you should discuss your situation with the Creditor, and advise them of your position. If your loan is regulated by the NCCP Act then they are required to provide you with some temporary relief to help you through your period of financial hardship.
How to fix your Credit File?
Unfortunately, there isn’t a quick solution to repairing your credit file. A Plan and Patience are the key.
Plan to get on top of your debts and repay them, or have a Credit Repair Agency help with having them removed. Neither option is a quick process but they will help you on your way to improving your Credit Report and Credit Score. Some of the key areas to focus on:
Repay in full or arrange a payment arrangement with the Creditor to repay the Debt, Default or Writ.
Communicate with the Creditor.
Avoid any further enquiries on your Credit File, especially Pay Day Lenders
Consult a reputable Credit Repair Agency and get them to help you with the removal of the lodgement. This isn’t always possible, so ensure no fees are payable upfront.
Over time your credit score should improve, so be patient.
Your Credit Report and Credit Score are an important mechanism used by a Lender when you apply for Credit. It helps them with their risk assessment.
Avoidance of Credit problems is the best strategy, but life events can often make it difficult to manage your finances. The team at yesapproved.com.au are always available to help and guide you through your situations. You can reach out to our team on 08 9304 2010 or Enquire below.
The information is intended to be of a general nature only. We do not accept any legal responsibility for any loss incurred as a result of reliance upon it – please make your own enquiries.
Any advice contained in this document has been prepared without taking into account your particular objectives, financial situation or needs. For that reason, before acting on the advice, you should consider the appropriateness of the advice having regard to your own objectives, financial situation and needs.