Bad credit? Here's how to understand it and fix it.

Fix your credit issue

Find your issue below. Each one explains what it is, what you can do now and how long it takes.

• 1. Low credit scoreMy credit score is low. What can I do?

  

  Your score comes from your report.

  Your score is worked out from your credit report. So the report is what you can work on. On-time repayments count most. Defaults, court judgments, bankruptcy and lots of applications pull it down.

  What to do now:

  • Get your free reports from both bureaus and read the reasons they give for your score.
  • Fix anything wrong. It's free.
  • Get every account up to date, and set up direct debits for the day after payday.
  • Stop applying for credit, including store cards and buy now pay later.

  How long: lenders report monthly, so allow 1 to 2 months for a change to show.

  Myth: "Paying my card down to $0 will lift my score." Bureaus here don't see your balance, so it won't on its own. It can still help what a lender thinks you can afford.

  For many lenders, a lower score mostly means a higher rate or a smaller loan, not an automatic no.

• 2. No credit history, or a new fileI've never had credit. Does that count against me?

  

  It's a blank page, not a black mark.

  About 2 million Australian adults have little or no credit history. It's common for young people, recent migrants and people whose bills were in someone else's name.

  Only licensed lenders can report your on-time repayments. Phone, internet and power companies can't, so paying those bills on time doesn't build history. A missed bill can still become a default. Your overseas credit history is unlikely to show here. Expect to start again.

  What to do now:

  • Get both reports. Your file may hold an old phone account you've forgotten.
  • Don't open several accounts to build history faster. Each one is an application.
  • History builds when a licensed lender reports repayments made on time, month after month.

  With a new file, lenders usually ask for more documents, or start with a smaller loan, rather than say no.

• 3. Too many credit applicationsI've applied with lots of lenders. Have I made it worse?

  

  Pause now. The effect fades with time.

  Every application stays on your report for 5 years, approved or not. But recent ones count more. Applications in the last 12 months weigh more than ones over 3 years old. Buy now pay later sign-ups, limit increases and phone plans can add enquiries too.

  What to do now:

  • Stop all applications today.
  • Get both reports and count your enquiries.
  • Dispute any application you didn't make. It could be identity theft.
  • If you were refused, get your free report, find out why, and don't apply somewhere else straight away.

  How long: lender rules that only look at the last month clear quickly. The effect on your score eases over about 12 months.

  Myth: "A credit repair company can delete my enquiries." Only wrong enquiries can be removed, and you can do that yourself for free.

• 4. Buy now pay laterDoes buy now pay later count against me?

  

  It's credit now, so lenders see it.

  Buy now pay later has been regulated credit since 10 June 2025. Each new account and each limit increase triggers a credit check. Late payments can be reported. Some providers report on-time payments, but not all do. Hardship arrangements with these providers don't appear on your report.

  Lenders see it two ways: as applications on your report, and as a regular cost in your budget.

  What to do now:

  • List every account and its limit, including ones you don't use.
  • Bring every plan up to date.
  • Stop new sign-ups and limit increases.
  • Close accounts you don't need.
  • List it on your application. It often shows on your statements anyway.

  How long: give your bank statements about 3 months without it being used for groceries, bills or fuel.

• 5. Late paymentsI missed some payments. How long will that follow me?

  

  Two years on paper. Often less for lenders.

  Each month's repayment code stays on your report for 2 years, then drops off. A month only shows as late if a payment is still more than 14 days overdue at the end of the month. So if you've missed one, paying it within 14 days, and before the month ends, matters.

  Catching up doesn't change past months. It stops the record getting worse.

  What to do now:

  • Check each late code against your own records.
  • If a direct debit failed because of a bank error while you had the money, ask for a correction.
  • Set up direct debits for the day after payday, and keep a small buffer in that account.

  How long: many lenders look at the last 4, 12 or 24 months, not the full 2 years. Every on-time month helps.

  Myth: "A late payment is the same as a default." It isn't. A default is more serious and stays for 5 years.

• 6. Behind on a payment right nowI'm behind on a payment right now. What should I do first?

  

  Try to catch up before the month ends.

  Being behind right now is the first thing many lenders look at. It's also often the quickest thing to clear.

  What to do now:

  • Ask your lender for the exact amount overdue and the date it must be paid by to count this month.
  • If you can, pay the overdue amount plus your normal payment before the month ends.
  • If you can't, call your lender before the month ends and agree a catch-up plan in writing.
  • If you can't afford even the normal payment, ask for hardship help (see 7).
  • Don't use a payday loan or new credit to catch up.

  A part payment that doesn't cover a full missed payment can still show you as behind.

  How long: from the first month-end that shows you up to date. If $150 or more stays 60 days overdue, the lender can start the steps to list a default.

• 7. Hardship arrangementWill a hardship arrangement stop me getting a car loan?

  

  It won't hurt your score. Lenders still see it.

  If you can't keep up with repayments, you have the right to ask your lender for hardship help, by phone or in writing. The lender must reply within set times, generally 21 days after it has the information it needs. It doesn't have to agree. If it says no, it must give reasons and tell you about AFCA.

  Hardship information can't be used to work out your credit score. But lenders can see it on your report, and many factor it in when you apply. It stays visible for 1 year after a temporary arrangement's final repayment. Some lenders won't lend while you're currently in a hardship arrangement. Others want it finished and your payments back on track first. Asking for hardship doesn't remove late payments from before you asked.

  What to do now:

  • Do a budget, then contact your lender and use the words "financial hardship".
  • Get the arrangement, and what will be reported, in writing.
  • Before it ends, agree in writing how any built-up payments will be handled.
  • Planning a car loan? Finish the arrangement and keep every payment on time before you apply.

  Never skip hardship help you genuinely need. Missed payments and a default last longer and do more harm. While your request is being decided, the lender can't list a default.

• 8. Defaults (paid, unpaid, phone and power bills, and clearouts)I've got a default. Is it there forever?

  

  Five years. Check it, then get it paid.

  A default can only be listed if at least $150 is 60 or more days overdue, after two separate notices at least 30 days apart. It stays 5 years from when it was listed, paid or not. Paying it doesn't restart the 5 years. Once paid or settled, it shows as "paid".

  What to do now:

  • Ask for copies of both notices. Check the amount and dates.
  • If it's wrong, dispute it before paying.
  • If it's valid and affordable, pay or settle it in writing.
  • Ask the provider to report it as paid. It must take reasonable steps within 3 business days.

  A clearout (serious credit infringement) stays 7 years. If it was listed because they couldn't contact you, it must come off once you pay or arrange to pay.

  Lenders look at the type, size, age and paid status. Small, paid phone or power defaults are usually treated more gently than loan or card defaults.

• 9. Court judgments and writsThere's a court judgment on my file. Can it come off?

  

  Only if a court sets it aside.

  A court judgment stays on your report for 5 years from the judgment date, paid or not. A court claim that has only been filed shouldn't be recorded on your report, and nor should judgments that aren't about credit. Many judgments happen because a court claim went unanswered.

  What to do now:

  • Get the judgment details and a copy of the original claim.
  • If you were never told about the case, or you have a defence, get free legal help before you pay. Paying first can make things harder.
  • If you have grounds, you can apply to the court to set it aside. The steps differ by state.
  • If you owe the debt, you can ask the creditor to agree to set it aside as part of a settlement.
  • Otherwise, pay it and get written confirmation so it shows as paid.

  Many lenders treat a judgment as a hard stop while it's on file.

• 10. Debt collectors and old debtsA debt collector is chasing an old debt. What now?

  

  Ask for the paperwork before you pay.

  You can ask a collector, in writing, for an itemised statement, the contract and the notices. If the debt isn't yours or the amount is wrong, say so in writing. Collection should pause while it's checked.

  A debt can become too old to sue for. That's usually 6 years, or 3 in the Northern Territory, from your last payment or written acknowledgement. A default for a debt that's too old must be removed if you ask.

  If a debt is old, talk to the National Debt Helpline before you pay anything. A payment can restart the legal clock.

  Your rights: collectors can only call at set times, 7:30am to 9pm on weekdays and 9am to 9pm on weekends, and no more than 3 times a week or 10 times a month.

  A bought debt can't be listed as a second default for the same amount. Some lenders decline more than one debt with collectors.

• 11. Mistakes and identity fraudThere's a mistake on my credit report. How do I fix it?

  

  Ask in writing. It's free to fix.

  Fixing a mistake is free, and it must be dealt with within 30 days unless you agree to more time. The full steps are in "Errors on your credit file" below.

  Common mistakes include late payments you paid on time, a default listed twice, a paid debt shown as unpaid, a default with no date, and applications you never made.

  If someone has used your identity:

  • Call IDCARE on 1800 595 160.
  • Report it to the police or ReportCyber (cyber.gov.au), and keep the reference number.
  • Place a free credit ban with one bureau and ask it to tell the other. A ban lasts 21 days and can be extended.
  • Since 1 October 2025, bureaus must tell you if someone asks for your report during a ban.

  Before you apply for a car loan, lift the ban or give that lender written consent to check your report.

• 12. BankruptcyI've been bankrupt. When can I borrow again?

  

  There's no legal wait after discharge.

  Bankruptcy usually lasts 3 years and 1 day. It stays on your credit report for 5 years from the start, or 2 years after it ends, whichever is later. It stays on the public insolvency index for good.

  While you're bankrupt, you must tell a lender before getting credit over $7,457. After discharge, there's no legal waiting period. Each lender decides.

  What to do now:

  • Get your discharge confirmation from AFSA.
  • Ask both bureaus to show your discharge date. AFSA doesn't update them for you.
  • Keep your bank statements clean and your bills paid on time.
  • If an application asks whether you've ever been bankrupt, answer yes.

  Some lenders consider people from the day of discharge. Others wait 2 years or more after discharge, and some want 7 years from the start.

• 13. Debt agreement (Part IX)I'm in a debt agreement. Where does that leave me?

  

  Every on-time payment counts.

  A Part IX debt agreement is a formal, legal deal with your creditors, run by an administrator. It isn't a consolidation loan. It usually lasts up to 3 years. While you're in one, you must tell a lender before getting credit over $7,457.

  It stays on your credit report for 5 years from the start, or 2 years after it ends, whichever is later.

  If no payment is made for 6 months, the agreement ends automatically and creditors can chase the full debts again.

  What to do now:

  • Make every payment on time, and keep the administrator's payment record.
  • If payments get hard, ask your administrator about a change before you fall behind.
  • When you finish, get AFSA's completion letter and ask both bureaus to show it as completed.

  Some lenders consider people part way through, after a run of perfect payments. Others wait about 2 years after it ends.

• 14. Personal insolvency agreement (Part X) or a deal you made yourselfWhat about Part X, or a deal I made myself?

  

  Deals you make yourself usually leave lighter marks.

  A Part X personal insolvency agreement is a formal agreement run by a trustee. It stays on your credit report for up to 5 years, or longer in some cases, and on the public insolvency index for good. Lenders usually treat it much like bankruptcy.

  An informal deal is one you make yourself with each creditor, such as a hardship arrangement or a settlement. A hardship arrangement shows for 1 year and can't be used in your score. Any default already listed stays its 5 years.

  What to do now:

  • Call the National Debt Helpline on 1800 007 007 before choosing any formal option.
  • Get every deal with a creditor in writing.
  • Keep paying while you talk to creditors.
  • If you pay a firm to negotiate for you, check it holds an Australian credit licence and belongs to AFCA.

• 15. Payday and medium amount loansI've used payday loans. Will lenders hold that against me?

  

  Recent use matters more than old use.

  A payday loan is up to $2,000. A medium amount loan is $2,001 to $5,000. Each application shows on your report. Some payday lenders also report repayments.

  Since 12 June 2023, repayments on all your payday loans together can't be more than 10% of your take-home pay. The old rule about 2 payday loans in 90 days no longer applies.

  What to do now:

  • Take no new payday loans or pay-advance apps.
  • List every short-term debt, with its repayments and due dates.
  • Call the National Debt Helpline for help talking to the lenders.
  • Pay them off without rolling them into a new loan.
  • For the next emergency, Moneysmart lists cheaper options.
  • List every payday loan on your application.

  Lenders usually check your last 90 days of statements, and payday applications over the last 6 to 12 months.

• 16. Bank statementsWhat do lenders look for in my bank statements?

  

  Whether a new repayment fits comfortably.

  Many car lenders read your last 90 days of bank statements, and some read 180. Responsible lending guidance tells them to watch for warning signs. These include an account that is often overdrawn, bounced payments, most of your pay withdrawn soon after payday, several payday or buy now pay later loans, and missed bills. Their tools also measure gambling and cash withdrawals.

  What to do now:

  • Download your last 90 days and read them the way a lender would.
  • If gambling is hard to control, call Gambling Help on 1800 858 858, any time. You can also join BetStop, the national self-exclusion register.
  • Keep a buffer so direct debits don't bounce.
  • Build regular savings.
  • Show every account. Lenders ask for all of them.

  How long: 90 clean days is the minimum. 6 months is safer.