Monday 24th June 2019

How can your credit card affect your chances of getting a loan?

How can your credit card affect your chances of getting a loan?

When it comes to the relationship between your credit card
history and loan applications, it seems many people are in the dark about
what’s truth and what’s not.

Gather a group of normal Australians in a room and ask them
about the role their credit card plays in getting a loan – you will likely get
these responses:

  • ”It’s fine that I have multiple credit cards –
    it means I’m a low-risk borrower”.
  • ”I just need to pay off my monthly card balance
    and I can secure any loan I want”.
  • ”I don’t even use my credit card – the chances
    of me getting approval is high”.

These statements aren’t true, however – your credit card
could affect your chances of getting a loan in more ways than you realise. Read
on to see what separates fact from fiction!

How lenders assess
your loan application

Lenders normally focus on one metric to decide whether
you’re a suitable loan candidate or not – card limit. This shows your repayment
capacity, and lenders normally judge the minimum figure to be 3 per cent of
your card’s limit, regardless of how much you owe when you apply.

What about my credit

While your card limit is important, your credit history is
another important point to consider when applying for a loan. While a history
of debt won’t completely rule you out from securing a loan, it will limit your
chances of securing a deal with favourable terms and interest rates. Similarly,
if you have a good credit history, you’ll have a better chance of finding a
more competitive loan.

How can I improve my
chances of securing a loan?

There are a couple of things you can do to improve your
chances of securing a loan:

  • Before you apply, you should ask your card
    provider to adjust your credit limit to the lowest amount possible. This will
    take some time, and you need to keep a record to show lenders your suitability.
  • A bad credit history means you’ll have to try
    harder to make higher payments more frequently in order to be considered a
  • If your credit history is positive, you should speak
    to a loan specialist to help you secure a loan that is right for you.

For more information about how to improve your chances of
getting a loan, contact our team today.