After spending plenty of time researching your new car, you finally find the one that ticks all of your boxes and lucky you – it’s an EOFY sale! So you apply for a loan and look forward to driving away from the dealership in your dream car, but then receive the terrible news that you have been refused a loan because of your poor credit score.
Your suitability as a borrower is something that lenders always assess when you apply for a loan, so a bad credit score is going to cause you a big problem. Even if your loan is approved, it can entail higher interest rates, simply because you are seen as a high risk borrower.
So a good credit score is pretty much mandatory, as it helps you to find the best loans at the best rates, and potentially saving you thousands of dollars over the life of the loan. So what do you do if you have been knocked back for a loan due to a poor credit score?
Access your credit file
If you have been knocked back for a loan due to a poor credit score, the first action you should take is to access your credit file and make sure that everything is correct.
Your credit history will include a lot of information, including all credit card applications made in the last 5 years, all of your credit cards and personal loans, credit limits, dates you opened and closed accounts, bankruptcy and insolvency details, overdue accounts and any court judgements to do with finances.
You need to read through everything carefully and make sure that it is up to date. Your credit file not only includes any negative financial aspects of your life, but also the positives as well. So it should show all loans that you have repaid within the allotted time frames. This means that for example, if you had previously been bankrupt, but have since paid off one or two loans, these paid loans should also be included in your file.
This is because a lender will not just look at the negatives, but will balance the pros and cons of your credit history. This means that you need to make sure that all of the positives have been included in your file, as mistakes can be made and rectifying any errors in your credit file might just get you over the line.
Tips for improving your credit score
If you have accessed your credit file and you can clearly see that it needs to be improved, there are lots of steps you can take to make this happen. Your credit file is actually quite dynamic, in that it is constantly changing according to the changes in your finances. So if you pay off a loan on time, this information should be added to your file.
In fact, the most effective way to improve your credit score is simply to pay all of your debts and bills on time. Whether this is paying your electricity bill, credit card, rent or personal loan, keeping up to date with your payments gives you a positive tick on your credit file. One good tip is that if you don’t actually have a credit card – it’s best to apply for one because making regular repayments every month on a credit card shows lenders that you are responsible with your money. On the other hand, if you have six different credit cards and are constantly juggling money between them to fund your lifestyle, this might not go well when you apply for a loan.
Stability is another way to show lenders that you are a low risk borrower and lenders will look at how long you have been at your current job and lived at your current residence. People who change jobs and residences frequently, don’t imbue a sense of stability and therefore, appear to be high risk borrowers to lenders.
Improving your credit score might be as easy as correcting errors in your file, but if errors are not the problem, then it can take time to build up a good score. So if you are hoping to borrow money from a lender, your best strategy is to start making improvements to your credit score before you make the application.
National finance solutions are you fast, easy and reliable leisure asset finance team. Whatever your needs are, whether it be a brand new boat, motor bike, caravan adventure, or family car, we have the solution! We work hard to ensure our customers are getting the finance that they need with an efficient, easy and stress-free process. To apply for a competitive car loan, call National Finance Solutions on 1300 13 50 50 or get an online quote today.
