As part of the approval process when applying for any type of finance, a lender will run a thorough check on your credit report to find out about your credit track record.
What is a credit report
A credit report is a snapshot of your credit history and includes:
- Your personal details
- How much credit you have and what types such as credit cards or home loans
- Have you made all of your repayments?
- Each time you have completed a credit application (whether it has been successful or not)
- Any serious credit infringements or cases of fraud
A default is placed on your credit report when payment of one or more of your credit accounts is not met depending on the amount and nature of the payment. In many cases you will receive warning notices stating that the late payment will impact your credit report. Defaults can stay on your credit report for up to seven years, sometimes even after the outstanding payment has been made.
How does a credit report affect your loan application?
In short, a history of good credit will definitely give you more choice when it comes to getting a loan, compared to a credit report with multiple defaults. But this is definitely not the only factor a lender will take into account. Banks and lenders understand that sometimes a default may be out of your control and approach these types of applications on a case by case basis.
A Loan Market broker can help in these situations by obtaining your credit report and working with you to understand what this means for your loan application. They have access to a panel of over 30 lenders and understand each ones lending criteria (including their credit requirements), so they can help find the right options for you.