As a lender, we are in a highly regulated market and those rules are set by ASIC. Some of the key themes around granting credit relate to making sure that the amount of the personal loan is suitable and that repayments can be made without putting the borrower into hardship. So we look at both of those. In terms of looking at the propensity to repay a certain loan amount, a lender is typically going to look at someone’s credit history. So credit history and your credit score indicates a level of risk and as a lender prepared to take on a level of risk for either a $20,000 loan or a $2,000 loan they’re quite different because the time exposure on the term of the loan is very different as well.
So they’ll look at information on a bureau, on your credit file, they’ll get from a bureau and apply the rules. Those rules may relate to cutoff points, that is, the lender may not take on customers with a score below a certain point or there are things on your credit file they don’t like the look of as well high level of applications and we’ve seen cases where applicants have up to 15 applications in the last month. Now as a lender, we don’t know the outcome of those applications, so it’s difficult to advance another personal loan in those circumstances. In addition to that, there’ll be things like you may have defaults, unpaid defaults, if they’re to another lender so, despite your score, there’s evidence of poor conduct or poor history that a lender doesn’t like the look of.
So in terms of your capacity to repay, making sure you can make the repayments on time for the term of that loan, a lender’s going to look at evidence of that on your bank statements. So your likelihood to repay is best reflected by your current repayment pattern that you’ve got on your current credit facilities – personal loans, car loans and even other things like rent, mobile phone bills and other obligations you may have. So on a bank statement, reasons someone may be declined are things like overdrawn accounts, that they’re not just once but regularly overdrawn, dishonoring payments to other lenders or missing payments in total if you’ve got a credit card but there’s no evidence of the payments being made then it’s hard to make a case for giving an applicant a new loan. So really a lender is looking for evidence of your likelihood to repay and your capacity to repay. So in order to improve your chances to get a loan, we’d suggest before you apply, you check the lender.
Make sure that lender is looking for customers with your credit profile and is happy to take on customers for your credit profile. There’s a lot of financial exclusion from the mainstream lenders due to those cutoff rules, but there’s also a lot of other options out there for customers as well. In terms of bank statements and your current facilities, maintain good conduct on those so that a lender gets comfort that you are the type of person to make those repayments.