If you find yourself with a bad credit history, it can make many things more difficult.

Read on to discover how bad credit affects you.

What is Bad Credit

Bad credit is the low credit score that reflects past negative listings on your credit report.

These listings are caused by missed credit repayments, loan defaults, Debt Agreements and bankruptcies.

When you apply for new credit, the lender will contact one or more of Australia’s credit reporting bureaus, who administer your credit reports.

They notify the lender of your credit status, which the lender then uses in part to determine whether they will lend to you, and on what terms.

 

How Bad Credit Affects You

Lenders are less willing to offer a loan or credit to individuals with bad credit.

Not only do you then have less options when it comes to your future credit applications, but you may find that those that are willing to lend to you, may only do so with less desirable terms.

These include higher interest rates and additional fees.

Bad credit can also impact on less obvious areas of your finances.

Having a poor credit score can also affect your job prospects, establishing a business, and may prevent you from securing a rental property.

Having outstanding debts may also mean stressful calls from debt collectors.

Read on for more about how bad credit can affect you.

Increased disapprovals

You can be certain that if you apply for a car, mortgage or other loan, the lender is going to check your credit score.

Bad credit means possibly being denied a loan, or only being offered a secured loan (where you put up an asset such as home or car, as protection for the lender to recoup their losses if you don’t repay the debt).

Increased costs

If you do get loan approval with bad credit, be prepared for less than desirable terms.

Having bad credit means that lenders are wary of your potential inability to repay them.

So they compensate themselves by way of higher interest rates. The lower your credit score, the higher you can expect the interest rate to be.

You’ll find that other creditors may also charge you more if you have bad credit.

Insurance companies and utility providers often vary their quote depending on your credit score.

Additionally, some charge security deposits to high risk borrowers.

Job prospects and new businesses

Perhaps surprisingly, did you know that potential employers can get your credit report?

Whilst it requires your written approval, employers can request (and often do, depending on the industry) an employment screening.

It doesn’t show your credit score, nor does it show personal information such as your date of birth, however it does give the employer an insight into your background.

Having bad credit can also affect you if you’re planning to establish a new business, for example if you are wanting to take out a loan to get started.

Calls from debt collectors

If you have outstanding debt and you aren’t meeting your repayments, the lender may pass your debt onto a debt collector in an attempt to recover their money.

It can be extremely stressful to receive regular calls from collectors.

Remember though, bad credit doesn’t have to last forever.

Seek free financial advice for help on how to improve your credit score.