Australian
Internet Loans
Australian Credit Representative 401491
Australian Internet Loans :: Articles
SHARE

Share this article!

Loan Finance: How to Shop Around Without Damaging Your Credit

Loan Finance: How to Shop Around Without Damaging Your Credit

If you are considering taking out a loan, you wouldn’t go out of your way to make it harder on yourself to get approved or to get a good interest rate, would you? Yet many loan applicants would enjoy a considerably better outcome on their loan application if they followed this important rule.

When you apply for a loan, whether it be an online finance application or in person at a bank branch, there's are a whole list of criteria that you will need to meet in order to:

  1. get approved for a loan that meets your needs
  2. get the best interest rate for the loan finance you want

Whilst your income, your age and your employment history are all important determinants for your loan eligibility, your credit rating may be the most important factor that a lender will use in:

  • determining your loan eligibility and
  • Need a Bigger Boat?
    We provide direct access to the best Boat Loan rates and options in Australia through our national panel of specialist marine finance brokers. Simply complete our quick & easy Boat Loan quote enquiry form to see if you qualify - and to gain access to the best Boat Loan offers from our broker panel.
  • the loan interest rate that you'll be offered if you do qualify

Ok, most everyone knows that you need a good credit rating to get a good loan - but many don't necessarily understand all of the factors that can damage your credit rating.

Late payments, defaults, bankruptcy, etc, rep some of the obvious things that will negatively impact your credit rating, but there is one key thing that a large proportion of would-be borrowers overlook ... and that is multiple loan applications.

Multiple Loan Applications 

If you're in the market for a loan to finance a home or a car (or anything for that matter), it seems reasonable that you'd apply with a few lenders and pick the one offering the best deal. Right?

After all, there are so many loan offers at your fingertips, they all make it really easy apply and comparing the responses is the best way to test for a loan approval and know that you'll get the best deal. Right?

You'd be wrong on all counts ... and here's why.

Each time you make a loan enquiry, the lender checks your credit file in order to very information that you have provided and to determine the risk to them in lending you money.

Each time a lender accesses your credit file, the enquiry is recorded on your credit file. In other words, whenever you go shopping for a loan, the lenders all get to see all your other enquires.

Each loan application, mortgage enquiry, credit cards, personal loans etc are all listed in your credit file.

Here's the Problem

Lenders do not like to see multiple loan applications on your credit file. In fact, most lenders have automatic disqualification rules for multiple applications.

The reason why lenders can be so inflexible on multiple applications is because they view anyone who has made more than a given number of loan enquiries in the last 12 months as a higher risk. And for lenders, it's all about risk.

If you are making multiple enquiries, it's probably because you are either

  • already having trouble getting approved and trying as many lenders as it takes in order to get approved or
  • just "shopping around" without any real commitment to proceed with a loan.

It's important to note that it costs a lender money when you make a loan enquiry because they can't give you an approval or even a quote without processing a loan application and assuming all of the costs that go with that process (including the cost of acquiring your credit report).

When you do take out a loan, it can take a few years for the lender to recover costs and make a profit.

So, if a lender sees you as a "shopper", even though you may have a perfectly clean repayment history and a great job, they see some risks:

  • they will need to spend money and resources on processing a loan enquiry that probably won't proceed because you've already been approved elsewhere 
  • you'll possibly jump ship part way through the loan should you find a better rate. That's not profitable business for them
  • if you've racked up multiple enquiries whilst shopping for an approval because you've been declined elsewhere, every additional enquiry will make your position worse. Only a brave lender goes against the tide!

The lenders' attitude is, if they can clearly identify you as a shopper, they are unlikely to write the loan! The result, application rejected, reason: too many credit enquiries!

Here's the Solution

Find a good Finance or Mortgage Broker because they:

have access to most banks and lending institutions.

know all the deals and where to obtain the best deals for you.

identify which lender/s offer the most likelihood for getting your loan application approved.

So, it's only after you've found the loan you want that you need to make a loan application.  You have only one application recorded on your credit file and you are not seen as a shopper.

Some people think that they can do just as good an analysis as a Broker. But, without access to the research technology available to the Broker, the most likely outcome would be an inferior deal and/or you mess up your credit rating in the process.  Counter productive.

Most Important

When dealing through a mortgage or finance broker, be sure to tell them everything. It's only by providing the broker with a complete picture of your situation and circumstances can he or she will be able to get you the deal that's best for you.

By definition, a Broker represents you and is not an employee or agent of the lender/s. If you are not completely honest with your broker, you run a high risk of being recommended to the wrong lender for your situation. This can result in you being approved at a higher interest rate than initially quoted for your loan - or your application might be rejected entirely.

That could serve to damage your reputation with the broker and lenders. Avoid!

Share this article:

Car Finance- Quick & Easy
If you are in the market for a new or used car, then we're in the market to help you arrange the money. Our car loan & leasing finance service is backed by a national panel of car loan specialists who will establish your eligibility, find lender/s offering the best deals for your situation - and help you through the approval and settlement process. No charge to you - and no obligation to proceed with any recommendations offered.
Time to Refinance?
If you are seeking lower rates, lower fees and more flexibility in your home loan. you are in luck! Our national panel of mortgage brokers is looking forward to an opportunity to assist you. Apply online for a free eligibility assessment and one of our broker network refinance specialists will get on the case to track down the best deal for your individual circumstances. Without any obligation and at no charge to you!


Finance News

Labor's Help to Buy Scheme: Addressing Symptoms, Not Causes of Housing Affordability Labor's Help to Buy Scheme: Addressing Symptoms, Not Causes of Housing Affordability
08 Dec 2023: .financialservicesonline.com.au

The Australian Housing Urban Research Institute (AHURI) raised concerns in a report last year suggesting that the $20 billion spent by governments over the past decade to assist first-time homebuyers had actually increased inequality and made housing less affordable. According to the report, these measures added to the demand and subsequently drove up house prices. - read more
Business Insurance Price Rises Showing Signs of Slowdown Business Insurance Price Rises Showing Signs of Slowdown
05 Dec 2023: .financialservicesonline.com.au

Rates across the majority of commercial lines are still experiencing increases, but the pace of the rise is starting to weaken, according to a recent webinar by actuarial firm Finity. The firm suggests that higher rate increases will be more targeted where necessary, while the majority of risks can expect more moderate rate adjustments in the upcoming financial year FY24. - read more
The New Era of Financial Advice: Transforming Client Experiences The New Era of Financial Advice: Transforming Client Experiences
05 Dec 2023: .financialservicesonline.com.au

Advisers are no longer just financial experts, they are now at the forefront of providing transformative client experiences. This shift in the industry is predicted to bring about significant positive changes, according to professional VBP chief executive, David Carney. - read more

Finance Articles

Good Debt Versus Bad Debt Good Debt Versus Bad Debt
Some people see debt as a curse. Others see it as a friend. Debt can make you miserable, or it can be used to make you wealthy beyond your wildest dreams. The trouble is, how do we know what is good and what is bad? - read more
How Credit Card Balance Transfers Can Damage Your Credit Rating How Credit Card Balance Transfers Can Damage Your Credit Rating
Since the banks and finance providers have been castigated for the way they seemingly indiscriminately awarded credit to people who could ill afford it, the chances of being accepted for loans and credit cards have decreased. Concurrently, there is a greater focus on individual's being aware of how credit works and what their financial behaviors means in terms of a credit score and history. - read more
5 Credit Killers 5 Credit Killers
A good credit score speaks volumes about your financial habits. It's the evidence most creditors need to evaluate your credit worthiness. - read more