How to improve your credit rating if it's bad and you want a loan

Bad or good, what is a credit rating?

Your credit rating or credit score (it’s the same thing) is a number between 0 and 1000. This number shows how good and reliable you are at paying bills and loan repayments. Anything over 500 is considered pretty good, but the closer you are to 1000 the better your credit rating and the more likely you are to be able to negotiate a good lending rate on a loan.

Bad or good, how is a credit rating worked out?

Your credit score comes from your credit report which is a detailed financial history. Your rating or score is made up by taking into account all kinds of things: how often you’ve applied for or been given credit by a bank or lending company and how it was paid off (think hire pruchase agreements, overdrafts, peronal loans, credit cards etc.), court judgements, your tenancy record, even if your partner has defaulted on a debt that has your name on it. Bad or good, this information will stay on your credit report for up to 2 years, and any loan defaults can appear for up to 5 years, even if you ended up paying it off.

Bad or good, do you know your credit score?

If you don’t you’re in the majority. Even though this information is available to you most people don’t know it. A website called Credit Simple will tell you for free. They did a bit of research before launching this service and found out only around 13% of New Zealanders have ordered their credit report.

What does it mean to have a bad credit rating?

Having bad credit can affect your whole life. It’ll not only stop you being able to get a loan of any size from a bank, it could stand in the way of renting or even signing up with an electricity company. It could even affect you overseas. But it’s not all doom and gloom, acquiring and paying back a small, short term loan from Moola can help you improve your credit score.

How to get good credit rating if it's in bad shape

The good news is it’s possible to rebuild your bad credit rating and make it a good one!

• First, get hold of your credit report and check for any mistakes; if anything on it is incorrect get it sorted ASAP.
• Pay your bills on time, every time. Being a consistent late payer affects your score. If it’s as simple as forgetting when your bills are due why not set up an automatic payment or direct debit with your bank so they’re never missed.
• Pay off any outstanding debts, even if you’re behind. A change to the law in 2012 now means that your credit report will reflect if you are paying back debts that are in default. This helps to bring that score up.
• Make regular payments. This shows that your behaviour has changed and you’re less likely to default again. Over time your past patterns become less important than current and recent activity.
• As soon as you get into any financial difficulty it’s always a good idea to be upfront and contact your lender as soon as you can to see if they can help. They may be able to work out a new repayment plan.
• How many credit cards do you have? If you have multiple and they’re all maxed out this will impact your credit score. They also have high interest rates so make them a priority to pay off.
• Make sure you update your address when you move, particularly with government agencies. Unpaid fines don’t go on your report but they will come up when a credit check is done. Nobody cares if they were sent to the wrong address.

It will take some time to improve your credit rating but it’s worth it.

How can Moola help improve a credit score that's in bad shape?

Used correctly and responsibly, Moola’s short term loans can help to improve your credit rating. As our loans usually have to be repaid within 30 days, successful loan repayments show you can be trusted to repay your financial obligations on time and you get a reputation as a responsible and reliable customer rather than a bad one. That’s how your credit rating slowly improves.

At Moola, we take pride in being responsible lenders. First of all we’ll start you off with a smaller short term loan to ensure you can manage it. Moving forward after that, for any loan you need we do checks to make sure you’re not taking on something unmangeable by only lending you no more than 30% of your weekly income. Afterall, no one likes a bad outcome.

So now you know a bit more about credit ratings and Moola’s fast little loans why don’t you apply for one? It’s so fast and so easy to apply for a Moola fast little loan online. Use our calculator to design the loan you’re after. And it’s worth reading our Q&A page, beforehand so you know what to expect.