Are you studying or new to the workforce and don’t have a credit history yet? Or maybe you had a rough patch with loan or credit card repayments and know your credit history isn’t looking its best right now?
While a loan without a credit check might sound pretty appealing, under Australia’s responsible lending obligations, licensed Australian lenders are required to complete a credit check as part of a customer’s loan application.
What else will lenders need to know?
When you’re applying for finance in Australia, a lender will require a few extra details in order to review your application and lend you money. Every lender will need to verify your identity and they may use a combination of documents to do this. This can include, but is not limited to:
- Driver’s licence or passport
- Medicare card
- Birth certificate
This is so that lenders know who they’re lending money to and can also help protect your identity.
You’ll also need to provide some information verifying your income. Whether you’re self-employed, working full-time, receiving Centrelink benefits, or on a pension, lenders will need to see that you’re receiving an income and that you’ll be able to comfortably afford your repayments. This can also help lenders tailor your loan amount to what you can afford and keep you out of financial trouble down the track.
To verify your income, you might be asked to provide one or more of the following:
- Bank statements
- Tax documents (such as an Individual Tax Return or a Notice of Assessment)
- Centrelink statements
- Pension statements
- Rental statements
You may also need to provide a range of other information to lenders, including information relating to your:
- proof of residence, such as council rates or a utility bill, etc.
- assets, including property and/or vehicles that you own
- liabilities, including any other debts and/or loans in your name, such as credit cards
- contact details for people who can authenticate any of the above details, such as your employer, landlord or accountant
No credit history
If you don’t currently have a credit score in Australia, some lenders may still be comfortable providing you with your first loan. However, they may view you as a ‘risky’ borrower because there’s no credit report available that verifies how well you’ve handled your repayments in the past. This might mean you’re charged a higher interest rate than someone with a long history of making repayments on time.
Bad credit history
Life happens, we get it. But if you’re looking for a loan without a credit check because your credit history isn’t as smooth as you’d like, don’t lose hope!
While a poor or bad credit history can make borrowing money more difficult, it’s certainly not impossible. Lenders may simply tailor your loan amount to better fit your circumstances, and you may need to provide some additional information or meet specific criteria.
Polish up your credit report:
It could also be worth polishing up your credit history as much as you can. You can do so by, for example, setting up a direct debit to help you pay your bills on time which can be a great first step towards lifting your credit score. You could also lower your credit card limit and try to pay more than the minimum repayment when possible. Finally, be deliberate with your loan enquiries and ensure any rate estimates or quotes won’t leave an enquiry on your credit file. Multiple applications in a short period of time can lower your credit score and make it harder to borrow when you need it.
Get yourself a guarantor
If you’re applying for your first loan or had some trouble with your repayments in the past, having a family member or friend with good financial status and credit history act as a guarantor on your application could improve your chances of being approved for a personal loan. This means they co-sign the loan and agree to accept responsibility for the repayments if you default. Your guarantor acts as a type of security, making it less risky for your lender to lend you the funds and can even help you secure a lower interest rate.
Whether you’re starting a credit report or trying to clean your existing ones up, with a little research, you may find a lender willing to lend you the money you need.