Having a bad credit history can affect your life in many ways. In 90% of cases, it’ll warn lenders and deny you a car loan or a mortgage. Banks and credit unions may deny applications for personal credit products such as credit cards or personal loans.

When they do approve a loan, they typically charge a higher interest rate. If you fail to pay it back, lenders place you in a “credit impaired” category. Here are the top 5 tips to repair a bad credit history.

1.    Get your credit history

If you suspect you have bad credit because you’ve been denied loans or mortgages, it’s a good idea to get your credit history. Your credit history will show in detail what loans you’ve applied for, bills you might have defaulted on and your credit or loan repayment history. This stays on your history for five years.

You can find out how to obtain your credit history at ASIC’s MoneySmart website.

2.    Consolidate or renegotiate your debts

If you have a large amount of debt owing from several lenders, debt consolidation may be an option for you. Consolidating debts means all your smaller debts, such as car loans, personal loans, mortgages or credit card payments combine into one loan. This means you pay back one lender instead of several with one interest rate and one monthly repayment.

Some debt consolidators offer additional services such as budgeting assistance and negotiating informal arrangements.

If you take action by renegotiating your debts with credit or loan providers, you may be able to change your repayments or claim a hardship variation. Click here for more on hardship variations.

3.   Clear your debts

Once you’ve consolidated or renegotiated your loan you should work hard to repay your debt as quickly as possible.

One option is to have all your bills paid each month via direct debit, allowing you to budget and plan ahead.

4.    Fix any errors and add information

Credit histories may reveal mistakes that may have occurred by your creditors. These could be a failure to notify you of repayments, recording a default while debt was in dispute or the creditor failed to update their records. It may also reveal if you’re a victim of identity theft. You can use the Credit Ombudsman Service to help you get these errors rectified, and it’s free.

Adding information, such as being married or having stable employment, will help positively skew your credit history.

5.    Seek professional help

Financial counselling can help you repair bad credit history. They can help you keep on track with repayments, fix creditor errors and consolidate, renegotiate or refinance your debts. Contact a professional finance expert to help with your debts and get you on the path to a clean credit history.

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photo credit: baptiste.franchina via photopin cc

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