equifax Archives - OurMoneyMarket
OurTips-P2P-Investing-OurMoneymarket 5 Reasons You Get Declined After Clicking Apply For Personal Loan

Have you clicked “Apply for Personal Loan”, completed the whole form, provided the necessary information, only to be rejected and never really been sure why. Below is a list of the most common reasons why you’ll get rejected for a personal loan.

#1 Credit Enquiries

If you’re not sure what a credit score is take a quick read of our previous post “5 Simple Ways to Improve Your Credit Score”. A low credit score can have a big impact on your chances of getting a personal loan and one of the biggest causes for a low credit score are the number of recent credit enquires you’ve made. Too many credit enquiries in a short period of time will have a negative effect on your credit score as it gives a perception of financial desperation. While it can be tempting to shop around for the best deal, or quick money, make sure you’re careful not to rack up credit enquiries. Having multiple applications on the go, then picking what you perceive to be the best one might seem like a good idea but ultimately, it’s going to lower your credit score and can have serious implications on your ability to access credit in the future. Instead, do your research before applying and then when you’ve found the lender that suits your needs proceed with the application.

#2 Income Type

Income is another common reason so many people are knocked back in credit applications. Income can be a complex beast as it can come from a number of different sources. Before applying for credit always ensure the income you receive is income that can be verified. That is to say you need the relevant documents to make sure you can prove that it is your income and that it is taxable income. Furthermore, even though you may earn income, is it a type that is acceptable to lender you are applying with? There are types of income (e.g. centrelink benefits) that some lenders will not accept, so be careful if a large part or all of your income comes from social security benefits, foreign income or investments. Ask the lender before you apply if your source of income is acceptable. If not, then you have saved your file against another credit enquiry.

#3 Employment Type

The type of employment you have can also have an impact on your chances of getting a loan. Lenders generally consider permanent full time or permanent part time borrowers safer to lend to than say casual, contractors or self-employed borrowers. This is due to the fact they receive a set minimum number of hours and are also guaranteed annual and sick leave. A casual customer on the other hand will have hours that can fluctuate and if they need a holiday or the day off due to sickness they unfortunately don’t get paid!

Furthermore, some online personal loan lenders will require you to be in your employment for a certain period of time before it can be accepted. It is always a good idea to check if there is a minimum period of employment required for your loan to be accepted. In particular casual employment and self-employment often have more stringent rules around length of employment due to this income source being considered less predictable.

#4 Default

While some people will receive a default on their credit file due to circumstances out of their control, such as financial hardship, others will receive theirs from situations that are entirely avoidable! A common source of defaults are disputes over phone bills and energy bills. You receive your bill in the mail and much to your shock it’s triple the usual amount. You call the company but they just won’t listen. In anger you decide you’re not going to pay it. You close your account and move to a competitor. The company sells your debt and you get a default on your credit file that will take at least seven years to get removed! Now every time you apply for credit this stops your application from being approved. While it can be painful to have to pay a debt you believe to be unjust its better for your credit file if you pay it, then dispute it, and try to get the money back

#5 Lack of Transparency

Be honest when you go to a lender. Dishonesty will get you nowhere. If you are hiding credit cards from the lender they’ll find out about it. If your repayment history is bad let them know as they may be able to advise you before a credit enquiry gets submitted on your credit file whether it’s worth your time applying. If you’re honest about your circumstance the lender may be able to put in place a finance solution that gives you what you need and makes your overall financial circumstances easier. If a lender finds out you’ve been lying during your application then they will decline you on the spot.

In Summary

So next time you consider pushing that “Apply for Personal Loan” button, be sure to put yourself in the best possible position to be approved. If you follow the above advice you’ll certainly give yourself a better chance of preserving your credit score and finding a loan suitable to you and your circumstances.

Follow Us on Facebook

Please message us on Facebook (https://www.facebook.com/ourmoneymarket/) if you have any questions about this article. If you found our article helpful in any way, please don’t forget to share us with your friends by liking our Facebook page.

OurTips-P2P-Investing-OurMoneymarket 5 Simple Ways to Improve Your Credit Score

A couple of months ago I wrote an article outlining the 3 Big Mistakes You Make That Stop You Getting a Loan. The article highlighted a number of common mistakes you make that negatively impact your credit score. Today’s article highlights 5 Simple Ways to Improve Your Credit Score, so you can obtain the loan you need or the interest rate you deserve.

#1 Check Your Credit File for Errors

An estimated 30% of credit files in Australia contain errors in them. Removing errors in your credit file can be an easy way to improving your credit score. Some common mistakes include:

  • Incorrect information on how long you’ve been with your current employer; or
  • Incorrect information on your current address or how long you’ve been at your current address.
  • More serious errors to look out for include:

  • Incorrect credit enquiries or duplicate credit enquiries from the same lender; or
  • Prior defaults, judgements or court writs that have since settled, but appear as outstanding on your credit file.
  • Removing these errors from your credit file can go a long way to significantly improving your credit score.

    You can obtain a free copy of your credit file from Equifax.com.au.

    Note: Look out for lenders that make additional credit enquiries for slight variations in your loan application. They may do this despite making an enquiry only the day before. To avoid the risk of duplicate credit enquiries always ask your lender if your credit variation or credit increase will result in a further credit enquiry.

    #2 Start Building a Credit Story

    The age and diversity of your credit file is an important factor in determining your credit score. For those that have never had a credit contract in their name, consider opening a basic credit account as soon as possible (e.g. a mobile phone contract). For those of us who have an existing credit record, check that your name is on all credit contracts you’re paying for – there may be an old mobile phone contract that’s still recorded under your parents’ names that you should get the benefit of!

    In addition to this, having a variety of credit contract types (e.g. a home loan, mobile contract, credit card and/or personal loan) can help improve your credit score in the long run. Obviously, the key is to making sure you manage all these credit accounts responsibly, and making sure that when applying you comply with point #3 below.

    #3 Stop Making ‘Bulk’ Loan Applications

    Don’t make multiple credit applications across different lenders during a short period of time. It is one of the worst things you can do for your credit score. To the credit bureaus this looks like you lack financial control or are financially desperate. Stopping this behaviour is a great way to improve your credit score.

    Always do your research before applying for credit and, if possible, get an early indication from the lender on whether you will be approved for the credit amount you need. For example, with OurMoneyMarket you can obtain a rate quote for a personal loan in minutes, without it impacting your credit score. We’ll also test whether you meet our eligibility criteria so you’ll know if you have a good chance of getting a loan before you proceed.

    #4 Take a Break from Applying for Credit

    Time heals all wounds. This has never been truer when it comes to improving your credit score. Taking a break from applying for credit will improve your credit score, especially if you have a track record of making multiple applications during a short period of time.

    Now, for those that need credit to make a purchase or consolidate debt, this is understandably not a solution, however for those that are frequently seduced by the latest credit card promotions, maybe think twice about whether it is worthwhile in the long run.

    #5 Make Payments on Time

    It sounds simple, but ensuring all your financial commitments are paid on time is a perfect way to improving your credit score. An easy solution to managing your payments is to establish direct debit arrangements for all your credit contracts.

    If you’re finding your existing debt repayments too difficult to manage, consider consolidating your debts into one easy to manage personal loan. You can obtain a free rate quote here.

    Summary

    Understanding how credit scores work can get a bit confusing at times, especially when the best methods to use in order to improve your credit score can appear contradictory. So what are our tips in a nutshell? In short, check your file at least annually for errors, put in place methods to ensure you make all your payments on time and when applying for credit wait for the lender to respond before going elsewhere, or preferably, apply with lenders that offer you a pre-approval process that won’t impact your credit score.

    Follow Us on Facebook

    Please message us on Facebook (https://www.facebook.com/ourmoneymarket/) if you have any questions about this article. If you found our article helpful in any way, please don’t forget to share us with your friends by liking our Facebook page.

    5 Simple Ways to Improve Your Credit Score – Source: OurMoneyMarket Lending Pty Ltd ABN 64 605 231 669 Australian Credit Licence 488228.

    OurTips-P2P-Investing-OurMoneymarket 3 Big Mistakes You Make That Stop You Getting A Loan

    Before jumping into the 3 big mistakes you’re making that can impact your chances of obtaining a loan. I have a few questions.

    Do you know what your credit score is?

    If you don’t know what your credit score is it’s worthwhile finding out. You can do this for free via Credit Savvy, Credit Simple and Get Credit Score. Forewarning, by obtaining your credit score from these websites you can expect to receive emails offering you credit (not from us, as we don’t have any affiliation with them, but from our competitors).

    So, what is a credit score?

    In short, it is a number that represents your “creditworthiness” and provides an indication to lenders of the likelihood of something “bad” happening on your credit file in the next 12 months (e.g. bankruptcy, consumer and commercial defaults etc.). A diagram of Equifax’s credit scores and what they generally mean in terms of credit quality is below.

    OurTips-P2P-Investing-OurMoneymarket 3 Big Mistakes You Make That Stop You Getting A Loan

    With Equifax (previously Veda) your score can range from -200 to 1200. The higher the score the better, for example, a score of 600 means there is a 5.88% chance that something “bad” will happen on your file in the next 12 months.

    What do you think your score is?

    I guessed mine would be at least around 750 (i.e. “Very Good”). I’ve never defaulted on any loan, I’ve never missed a payment, though as I’m relatively young I figured the “age” of my credit file might go against me (i.e. not much data to draw on). Well I was wrong. My credit score is 518 (i.e. “Average”) …Ouch! So how did this happen?

    Well I made the same mistakes a lot of people make. Here are 3 common mistakes that impact your credit score and your ability to get a loan or the interest rate you deserve.

    #1 Don’t Get Sucked into New Credit Card’s Unless You Really Need It

    This was my downfall. Oh, the glory of 50,000 frequent flyer points for just signing up to a new credit card with ABC Bank – “I’ll just get a few of these bad boys and my dream holiday to Argentina will be sorted”. Sadly, each time you make a credit enquiry it impacts your credit score. Below is what happened to me the last time I opened up a new credit card:

    • Credit Score Prior to Credit Card Enquiry = 554

    • Credit Score After Credit Card Enquiry = 518

    My score dropped 36 points! Suggesting that I was now 2% more likely to have a “bad” event occur on my credit file in the next 12 months.

    Now I did this quite a few times over a couple of years (flights to Argentina are expensive and points aren’t worth what they used to be), and I know I’m not alone in doing so. It does seem unfair. My behaviour as a borrower didn’t change. I always honour my commitments. I didn’t even need the credit card. To the credit bureau’s however, the pattern of my enquiries suggested desperation and I was penalised for it.

    So what do you do if you actually need a credit card or personal loan, but are worried about the enquiries impacting your credit score? Check whether the lender has a “pre-approval” process. For example, with OurMoneyMarket you can obtain a rate quote for a personal loan in minutes, without it impacting your credit score! We’ll also test whether you meet our eligibility criteria too so you’ll know if you have a good chance of getting a loan before you proceed.

    #2 Avoid Payday Lenders If You Can

    So not only do enquiries impact your credit score, but the type of enquiry also impacts it too. This is particularly the case when making an enquiry with a ‘Payday’ lender, but also applies for credit cards.

    What is a payday lender?

    A payday lender typically provides loans of up to $2,000 with repayment terms between 16 days to 1 year. They will often charge interest rates in excess of 45% (sometimes in the hundreds), promise you quick cash within an hour and from time to time can be seen in advertisements dressed as bunnies or wizards!

    Sadly, we’ve seen some good borrowers badly impacted by payday loan enquiries, which prevented them from accessing credit 12-24 months later. Unfortunately, these borrowers had no idea the ‘Payday’ lender was considered “high-risk” by the credit bureaus. So, please check the terms and conditions before applying for a loan. If the interest rate is 45%+ or is for an amount less than $2,001, then there’s a good chance its considered ‘Payday’.

    #3 Don’t Let Your Broker Run Wild

    There are many people who have had great experiences with brokers, however sometimes it can go horribly wrong. Please keep a check on your broker and don’t let them “shop you around” to lenders, as all these enquiries will negatively impact your credit score and just make things worse.

    In the case of home loans, Mortgage Managers are hard to come by, but companies such as Mortgage Direct, make it their business of knowing the “in’s and out’s” of lender’s credit policies when it comes to home loans. They can be helpful in giving you an indication of whether your home loan will be approved without impacting your credit score.

    Can I Fix My Credit Score?

    Yes, you can. However, we’ll explore this in detail in a future article.

    Follow Us on Facebook

    Please message us on Facebook (https://www.facebook.com/ourmoneymarket/) if you have any questions about this article. If you found our article helpful in any way, please don’t forget to share us with your friends by liking our Facebook page.

    Contact Us

    Don't hesitate to contact us if you have any concerns or questions

    Get in touch