How your credit history determines whether your loan is approved
Find out how your credit record affects your ability to get a loan and what you can do to improve your chances of being approved.
With a good credit score, any credit provider will be willing to offer you a loan. If you have a bad credit history, banks and many other lenders will be less willing to loan you money. It’s as simple as that.
We are going to look at ways to ensure that you have a good credit score and how to keep your score at the correct level so that you can apply for any loan that you would like. Applying for a loan should be easy and, certainly will be, once you improve your credit score and rating.
Improve your credit score & get the loan you want
Did you know that if your credit score is at a certain level, it will be easier for you to get the loan that you are looking for? Yes, this is the case; you can apply and get the loan that you want if your credit score is high enough.
The bank does not see you as a risk if you have a high score, so they will not ask you for collateral. An alternative would be to opt for a secured loan or apply with a guarantor.
Ways to ensure that your credit score increases
All you have to do is to ensure that you are paying your bills on time, and that you stick to the agreement with the respective lender. The moment that you falter one of your bills, your credit score rating and report will be updated to reflect the default.
Remember to always be on time when paying your bills. If you have applied for a loan, always make sure that you pay your loan off on time. Some lenders allow early repayment, which is another way to improve your credit rating.
Tips to maintain a good credit score:
- Keep the number of loan and credit cards you have to a minimum.
- Avoid making multiple loan applications within a short space of time.
- If you are rejected for a loan, do not make another loan application.
- Avoid closing multiple accounts at once.
- Maintain, at the very least, your minimum loan repayments on all loans and credit cards.
- Try to make extra repayments towards credit card debts.
What does a good credit score look like?
Did you know that if you have a credit score of 620 or more you are seen as a lower risk? What does this mean? Well it means that your credit score is excellent and that you can take out a loan without having to offer collateral.
If you qualify for an unsecured loan, not only are you not required to have collateral but you could possibly get much better rates on the loan.
The bonus over here is that you have more than likely had a very clean track record and that means that Australian banks are more willing to loan you the money. With a clean credit score, it will be easier for you to get the loan that you would like without having the struggles of having to provide documents to the bank.
If having a credit score of 620 is good what happens if your score is lower?
This just means that either you have not had a chance to build up your credit score yet, or you are building your credit score. You would not think that a student who has been studying for four years will have a high credit score, even if they have been paying off a student loan.
With students you only pay off the interest until you are done studying so they wouldn’t have a high enough credit score. This does not mean that you cannot get your loan, it means that you are a higher risk to the bank and yes, it’s very possible for you to get a loan.
The fact is that you will just have to perhaps provide documents to the bank such as your payslips or you will have to show your bank statements so that you can get your loan.
Ways to improve your chances of being approved for a loan
- Making use of a broker will greatly improve your chances of being approved for a loan since they have access to loan offers from multiple lenders, some of which have flexible loan qualification requirements.
- Use a loan comparison site to find a loan option that meets your needs. This will ensure you only need to make one loan application.
- Ensure you can afford the repayments on the loan by using a loan calculator to determine what your repayments will be and reduce your chances of being denied for a loan.
- Maintain all minimum loan repayments and obtain a copy of your credit file.
Loan options for bad credit
In the event that you do not have the time to improve your credit before applying for a loan, you can opt for a bad credit loans.
Bad credit loans are usually offered by alternative credit providers but you may also get one from a traditional lender if you are able to provide security.
Applying for a loan online
You can apply online or you can apply at any branch. If you apply online your loan application will take up to ten minutes to apply. The lender will contact you to let you know if your loan has been approved.
If you would like, you can go into the bank where it might take longer, but you will be able to apply for your loan and receive personalised customer service from the bank.
So yes, your credit history can determine whether you can get a loan, but even if you haven’t built up the credit that you need you can still apply for a loan. Your credit history isn’t a done deal and if it is not high enough, you can always just apply to get a bad credit loan that might help you with improving your credit score.