How Long Does A Bad Credit Rating Last?

Overview

• What is considered “bad credit”?
• How long does a bad credit rating last?
• Factors that can impact credit duration
• Keeping your credit in good shape
• Will bad credit affect me if I want to get a loan?

Before we explore how long bad credit sticks around, or how to repair bad credit, it’s important to understand what it actually means. In Australia, your creditworthiness is demonstrated through your credit report, which showcases your credit history to potential lenders.
This information helps lenders assess whether you are a high risk for repayment or if you have a track record of good financial behaviour. The three major credit reporting agencies in Australia are Equifax, Experian, and Illion.
While each agency has their own scoring criteria, generally a score of 500 or lower is considered below average, or bad credit. A score of above 661 puts you in the good range, while anything about 853 is considered excellent. Below is a breakdown of the full credit score ranges from Australia’s major credit agencies.

Bad credit information may stay on your credit report for up to 5 to 7 years, depending on the type of negative event. For example, late payments typically last up to 5 years, while more severe issues like bankruptcies may remain for 7 years. However, the impact of bad credit may decrease over time, especially if you start practising good credit habits like making on-time payments and reducing debt.
 

Several factors may influence how long certain items remain on your credit report. These include:

• The type of account or event: For instance, while inquiries into your credit (such as when you apply for a loan) may stay on your report for only two years, more serious issues like defaults can last much longer.
• Your repayment behaviour: Timely repayments may help reduce the impact of negative marks on your credit over time. Conversely, late or missed payments may lead to a prolonged effect.
• The credit reporting agency: Different agencies may have slightly different policies for how long they keep your data. It’s always a good idea to check your credit report with multiple agencies to ensure accuracy.

You can’t always control what happens to your credit, but you can take steps to keep it in tip-top shape! Here are some tips:

• Make payments on time: This one’s simple, you need to organise your bills and pay them on time in order to maintain or improve your score.
• Keep old accounts open: Even if you’re not using a credit card, having a long-standing line of credit can improve your score, as it shows a history of managing credit responsibly.
• Limit applications for new credit: Applying for too many loans or credit cards at once may raise red flags to lenders, as it might seem you’re overly reliant on borrowing.
• Check your credit report regularly: Mistakes happen! By reviewing your report at least once a year, you can spot any errors or issues early. It’s free to check your report every three months, but if you want to do it any more frequently you may incur some fees.
• Debt consolidation: If you’ve accumulated a large amount of debt, you might be eligible for a debt consolidation loan which, if you continue to pay off, can increase your credit periodically.

Bad credit may affect your ability to get a loan, as lenders typically review your credit history to determine risk. However, some lenders offer small personal loans to individuals with less-than-perfect credit. While you might face higher interest rates or stricter repayment terms, you still have options. It’s important to always review the terms and ensure you can repay the loan before applying.
 

It’s important to stay on top of your credit history to make sure it reflects responsible borrowing and repayment. Whether you’re planning a large purchase or just trying to keep your financial options open, keeping an eye on your credit can make a big difference in the long run.

At Red Tree Finance, we offer cash loans designed to help you when you need it most. Our loan process is quick and easy, making it possible to get the funds you need, even if your credit history isn’t flawless. If you need an emergency loan to cover an unexpected bill, or a debt consolidation loan to try to improve your credit score, we can help! Apply for a loan today or contact our team for more information.

How long does information stay on my credit report?

Credit information, such as late payments or defaults, may stay on your credit report for up to 5-7 years. This can depend on the type of information and the credit reporting laws in your area.

How often should I check my credit score?

It’s a good idea to check your credit score regularly – at least once a year – to ensure everything is accurate and up-to-date. You may also want to review it before making big financial decisions like applying for a loan or credit card.

Can a small personal loan improve my credit score?

Taking out a small personal loan may help improve your credit score if you make timely payments and manage the loan responsibly. However, it’s important to only borrow what you can comfortably repay to avoid negative impacts on your credit.

The information provided in this blog is of a general nature and is provided without considering your specific objectives, financial situation, or needs. It is intended for informational purposes only and should not be relied upon as financial, investment, or other professional advice.

Before making any financial decisions or taking action based on the information presented, you are strongly encouraged to assess its appropriateness in light of your individual circumstances. Red Tree Finance does not intend to provide personalised financial advice, and you should seek independent financial, legal, tax, and other relevant advice tailored to your unique situation.