Whether you’re treating yourself to a well-deserved holiday or are looking to give your kitchen a bit of an upgrade, taking out a personal loan can help you do it.
But in an age where it’s never been more important to maintain a pristine credit score, it’s not uncommon for many Aussies to take precautions to keep their credit history in check.
And if you’ve been thinking about taking out a personal loan, you might be wondering whether if simply checking personal loan rates can make a difference to your credit score, especially with many lenders now offering personalised rates.
Since comprehensive credit reporting (CCR) entered the banking world, Aussie borrowers with clean credit histories are now being rewarded with lower interest rates on credit products, like personal loans.
So while using a free comparison site like Mozo, or simply browsing the web for personal loan rates won’t make a difference to your credit score, depending on the lender and their process, obtaining a personalised rate might.
According to Chief Operating Officer at NOW FINANCE, David Norman, customers are able to access their personalised rate before applying without putting their credit score in jeopardy.
“Historically, some lenders have only provided customers with their actual interest rate after they submit a full application, impacting their credit score and leaving a mark on their credit report. We believe it’s important for customers to be able to make an informed decision upfront, so we allow customers to get their personalised rate before they apply using our Get My Rate tool,” he said.
Many services, like Mozo’s Rate Matcher, also allow you to compare personal loans that you are eligible for without causing any damage to your credit score and can help you avoid being rejected for a personal loan application, which brings us to the next question.
When will my credit score be impacted when shopping around for a personal loan?
Even though we’ve established checking personal loans rates is unlikely to hurt your credit score, it doesn’t mean prospective Aussie borrowers are in the clear just yet.
It’s important to keep in mind that whenever you apply for a credit product - and are either accepted or rejected - the application will appear on your credit history.
“One application for credit or a loan is not likely to hurt your score but if you've applied for several other credit products recently, it could make an impact as numerous applications can be perceived as desperation for credit or it could indicate to lenders that you're taking on too many accounts in a short period of time,” said Credit Reporting Expert at CreditSmart, Geri Cremin.
It’s recommended that if you are rejected for a personal loan to avoid applying for others until you find out why you were rejected. Generally, it may be due to a poor credit history, so it’s worth repairing your credit score first before applying again.
You can do this by making sure you pay all your bills on time by setting up a direct debit, closing any unused credit accounts and fact checking your credit report to make sure there are no errors or black marks you can’t explain.
Then once you’re ready to go, head on over to Mozo’s free personal loan comparison tool to find the right personal loan for your spending needs.