While bad credit will never work in your favor, that doesn’t necessarily mean you don’t qualify for a personal loan.
Let’s start with a few key questions:
what is a credit history?
Essentially, your credit history (rating or score) is a number between 0 and 1000 (or sometimes 1200, depending on the credit report).
This number is a score based on the personal and financial information on your credit report, including whether you’ve ever filed for bankruptcy, been denied a credit card or loan, or paid your bills to time.
When applying for a loan or credit card, the lender will check your credit score to determine your borrower’s reliability based on your rating. So having bad credit can be a red flag for lenders.
What type of personal loan can I qualify for if I have bad credit?
It can be more difficult to qualify for a personal loan if you have a bad credit history than an applicant with stellar credit.
You might also be offered a much higher interest rate and fees than those with a good credit rating.
It’s also important to keep in mind that lenders may require more intense application processes and financial verification procedures for applicants with low credit. This is to make sure that you can handle the loan repayments. Additionally, lenders can ask for additional collateral on the loan.
What about payday loans?
Some types of online loans may not require a credit check and offer instant money transfers known as payday loans. Mozo does not approve these types of loans as they are potentially very risky due to their high interest rates.
Learn more about all the types of loans available to apply online at the Mozo Online Lending Hub.
How to get a good personal loan with bad credit?
Since it can be extremely difficult to get approved for a good interest rate personal loan with bad credit, often the best approach is to try and improve your credit score.
How Can I Correct My Bad Credit Score?
Improving your credit score is not an overnight process, but it is worth it.
The first step is to obtain a copy of your credit report from one of the major credit reporting agencies in Australia, such as Equifax or Experian. Next, check your report for errors or possible identity fraud because you don’t want to be blinded by inaccurate information during a credit check.
Once you’ve combed through your relationship, it’s time to get your finances in order. You will have to pay all the unpaid debts. All defaulted invoices will be listed on your report for five years, but will be marked as paid when you pay them. So while overdue bills are always a mark against you, it’s better to pay them late than not at all. You should also try to set up direct debit payment systems to avoid any further late payments.
Finally, limit your credit requests. Each time you do this, a lender performs a “full investigation”, which is added to your credit report. Too many inquiries will negatively affect your credit rating.
To learn more about improving your credit history before applying for a personal loan, check out Mozo’s step-by-step guide to improving your credit.
Before taking out a personal loan, it is essential that you do your research and know what will work best for your situation. Start by consulting the Mozo Personal Loan Center for more information.
Compare the best personal loans below to get an idea of the types of loans that would be right for you:
^ See information on the Mozo Experts Choice Personal Loan Awards
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