How to Read Your Credit Report

What is a credit report?

A credit report spells out your financial behaviour. It includes things like your credit and repayment history, credit enquiries, bankruptcies, any recent loan applications, your all-important credit score and your personal details. Lenders use this information to help decide whether to approve your loan application.

But it’s not just lenders who can run a credit report – you can use it to your advantage too! Understanding and reviewing your report can help you improve your credit score and increase your chances of getting a personal loan approved.

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What do you look at when you read my credit report?

A look into your credit report will reveal a number of things about your ability to repay a loan. Ultimately, we want to make sure the loan you’re applying for fits within your budget and the payments will be manageable.

Things lenders look at include:

• Payment history – late payments, missed payments, mortgage default and bankruptcy are all red flags to lenders.

• Outstanding debt – do you have a lot of debt? Put simply, the less debt you have the greater your chances of getting a loan approved.

• Credit history – if you have a good track record of responsible credit use then this boosts your credit rating and lenders love a high credit score! On the other hand, if you suddenly open up multiple credit card accounts in a short time then lenders will question why you need so much credit and it could hurt your credit score.

• Credit enquires – for every application you submit – be it a personal loan, credit card, car loan or phone contract for example, the lender will run a credit report. While it’s good to compare lenders, you should only submit a loan application with the lender you want to go with. Shopping around for credit by submitting multiple applications can have a negative impact on your credit score.

• Credit score – we mentioned lenders like a high credit score, and while it’s not the deciding factor for approving a personal loan, having a healthy credit score does look more favourably on you.

• Personal information – details such as your name, address and date of birth. Why do we look at this? To ensure the information you provided matches what’s in your credit report and to verify it is definitely you who is applying for the loan.

Will a declined application harm my credit score?

Being knocked back for a personal loan doesn’t directly hurt your credit score. But the enquiry into your credit history after submitting a loan application can impact it.

When you apply for a personal loan, we perform a credit check to pull your credit report from one of the 3 main credit bureaus — Experian, Equifax or illion. This is known as a hard inquiry and it will appear on your credit report.  Enquiries can cause your credit score to drop, particularly if you have a substantial number of them. Enquiries stay on your credit report for up to 2 years.

The lower your credit score, the harder it will be for you to get a loan. If you do get a loan, it is very likely the interest rates are likely to be higher than if you had a higher credit score.

Do you always perform credit checks?

Yes – it’s part of being a responsible lender. Running a credit check allows us to pull your credit reporting information, which includes your existing and past credit activities, previous loan applications and your credit score. Looking at this gives us an idea of how you handle credit and how much room you have to borrow. We do this with every loan application we receive to ensure a fair assessment for all.