Credit Scores and how they affect your loan application!
A low credit score may affect your chance of having your loan application approved – You may ask how does it work and why does it matter to a finance company? Read on and we will show you:
- What is a credit score?
- How does a credit score affect my personal Loan?
- What affects my credit score?
- How can I improve my credit score?
- Where can I get a copy of my credit score?
- Can I still get a personal loan with bad credit?
What is a credit score?
A credit score is used by credit reporting agencies to determine a person’s credit worthiness much like a report card or exam result. In New Zealand credit scores range from 0 – 1000 and A good credit score is 500+. Each finance company or bank have different rules around how they use credit scores, but usually the higher your score the better chance you have of getting approved.
How does a credit score affect my personal Loan?
As mentioned earlier your credit score is like a report card on your past credit history. The higher your score the better chance you have of getting your personal loan, debt consolidation or car loan approved. It is not the only thing a lender will look at, but it can give you a better chance of getting approved and a lower interest rate.
What affects my credit score?
A number of variables go into how your credit score is calculated like:
- How many credit inquiries have been made.
- Who made the inquiry.
- What amount the inquiry was for.
- How many defaults are listed.
- The dollar value of the defaults listed.
- Any judgement’s listed and the amount.
- Are you listed as Bankrupt or No Asset Procedure (NAP)
- Have you been paying your bills on time.
- Age of your credit file.
These are not all the things that affect your credit score but does give you guide to what may affect your score.
How can I improve my credit score?
You can improve your credit score by:
- Rather than applying for a new loan with another company, why not try somebody you already have a loan with first. They may not need to complete another credit check.
- Pay your bills on time. Credit agencies have been working on Comprehensive Credit Reporting or CCR for a number of years now and hold data on arrears for Banks, Finance companies and Utilities providers.
- Reduce the amount of credit checks completed against you. Banks and Finance companies are now completing credit checks as Quotes, which means the inquiry will only go against your name is a loan is taken out. Other places such as Brokers, Car Dealers or retail store do not do this so any check they complete will affect your credit score.
- Another way to improve your credit score is to reduce the amount of loans, Credit cards, Store cards or payday loans you may have. You can do this by doing a Debt Consolidation.
You can find out more on how a Debt Consolidation can help you on our Debt Consolidation page.
Where can I get a copy of my credit score?
In New Zealand we have 3 main credit reporting agencies being Equifax, Centrix and Credit Simple. Now your score may be different with all 3 depending on how your data is scored and they may not have all the same data, however your scores will be similar.
A large number of Kiwis have no idea what their credit score is like until they apply for a personal loan or debt consolidation. This has now been made easier and you can access your score before you apply for a loan.
To check your credit score you can use the links below:
Can I still get a loan with a bad credit score?
Yes you can get a loan with a Bad or Low credit score. As mentioned earlier there are a number of variables that go into calculating your score. Meaning not all finance companies use the credit score to approve a loan. Some purely look at:
- How old is your credit file
- The number of inquiries on your credit file
- Do you have any unpaid defaults or judgements
To get a Personal Loan with a bad credit score most companies will need some sort of security like a property or car. It also helps if your loan is to repay any of the defaults or judgement’s listed.
You can find out more information about personal loans on our Personal Loan page.
To see if you meet our requirements for a personal loan or debt consolidation loan Apply Now.