How long does a bad credit rating last?

If you’ve ever been rejected for a home loan or a credit card, then you’ll know that a bad credit score can be a bit like an iceberg – lurking unseen until it sinks your application.

Whenever you apply for a loan, whether it be for a car, house or a credit card, your credit score may play a significant role in the approval process. Your credit score reflects the financial history listed on your credit report – including times when you’ve paid bills late, repeated applications for credit, or if you’ve ever defaulted on a payment.

Banks and other lenders look at this information to determine if you can be expected to meet the obligations of your new loan. A low credit score shows that you may have difficulties paying back what you owe on time, and the lender may decide not to lend to you as a consequence.

While your credit report does also list positive things, like paying your bills on time, the negative aspects do stand out to lenders. So it’s a good idea to do what you can to repair your credit score and wait until your credit report has improved before applying for new credit cards or loans.

How long does a bad credit rating last? How long does it take to repair it?

According to consumer credit reporting agency Equifax, negative information can stay on your credit report for approximately seven years, depending on how ‘bad’ your credit score is and what type of defaults (unpaid debts) are listed on your credit report.

Equifax says that most late payments and negative accounts can remain on a credit report for up to seven years from the date of the first missed payment, while some bankruptcy public records can stay on a credit report for seven to 10 years.

While lenders will pay attention to all of your past activity, they may also be interested in your recent actions within the last one to two years. Having a recent history of making payments on time may help to mitigate payment problems in your past.

It’s a good idea to also make sure that all of your past debts are fully paid off where possible. While the defaults will still be listed on your credit report, your credit report will be updated to show that you have paid those debts.

It could take some time to fully repair your credit score, but don’t let that discourage you. The sooner you start fixing it, the sooner you’re likely to see results.

There are options out there for people who need a little extra cash flow and want to get a credit card or loan while your credit score is low, as long as you’re prepared to show that you can meet the conditions of that loan or card.

The table below displays a snapshot of credit cards with 0% balance transfer offers on Canstar’s database, with links to providers’ websites. These results are sorted by the length of the 0% balance transfer period (longest to shortest), then provider name (alphabetically).

Compare Balance Transfer Credit Cards

How to repair your credit score

If you want to rebuild your credit score, check out a few top tips on how to improve your credit rating. Some steps that you can take include:

  1. Pay all bills on time
  2. Don’t apply for any new credit
  3. Pay off any outstanding loans and debts
  4. Keep your credit card balance low
  5. Check your debt-to-credit ratio
  6. Hold onto any accounts that have a positive record of repayments
  7. Diversify your credit if you can

Compare Debt Consolidation Balance Transfers

 

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