Credit inquires effect your credit rating score!
Lately we have had a lot of clients looking for personal loans or home loans who have been knocked back purely on the basis that they have made too many inquiries or applications elsewhere. Each time you apply for a loan it is likely that there will be a credit inquiry lodged against your Veda account. Unfortunately, lending institutions look at this as a major determinate as to whether they will loan to you or not. The theory behind this is that statistically the more credit inquires that are made the greater the chance of default on a loan.
Most clients who fall into this trap are completely unaware that they are jeopardizing their chance of a loan by making such inquiries. We have found that any more than 3 inquiries in a 3 month period could impact your chances of a successful loan application. The good news is that after 3 months of no credit inquiries most lending institutions will ignore previous inquiries.
Some tips on getting a personal loan
If it is a personal loan you are looking for a lot of personal lenders will not look at your credit history, preferring to look at your last 3 months of bank records. It pays to ask from the outset whether they will be making a credit inquiry on your file or not so you know where you stand. When examining your bank statements, lenders are looking, among other things, to see whether your income is more than your expenses so they can meet ASIC requirements in regards to responsible lending. They will look for irregularities as well such as gambling habits or large cash withdrawals. So it pays to have a look at what you’re last 3 months of transactions looks like.
Competition is strong in the personal loan market these days, so shop around for the best offer before applying to any lenders. The maximum amount that lenders can charge is regulated by ASIC. No more than a 20% establishment fee can be charged and a 4% monthly ongoing account fee.
Look for more cost effective options
If you have short-term credit issues there are other options available for you. Most regular bills, such as telco and utilities, have hardship provisions so you can go on payment arrangements. So does the ATO in many circumstances. As a first point of call, try deferring some of these bills.
A lot of clients try to pay off a credit card with short-term finance. In most cases the finance they are using is more costly than the interest on their credit card. Short-term loans generally have double the interest rate compared to credit cards.