Got an excellent credit score and need a personal loan? Here’s how to find financing that suits your needs.
If you’ve managed your personal finances so well that you boast an excellent credit score, you’ll find it much easier to access a loan than a borrower with a bad credit history. And if you’re searching for a personal loan, you’ll be able to access loans from a much wider range of lenders.
Let’s take a look at how to compare and choose personal loans, and what it takes to acquire and maintain an excellent credit score.
What is an excellent credit score?
The definition of an excellent credit score in Australia varies slightly depending on the credit reporting bureau that provides the score:
- If you get an Equifax Score/VedaScore from Equifax, a score from 833 to 1,200 is considered excellent.
- If you get a credit score from Experian (which you can do for free with finder) a score from 800 to 1,000 is excellent.
Why the difference? Each credit reporting bureau uses its own unique system to calculate your score. While those scores are based on the same financial information, the different algorithms each bureau uses lead to different scores.
How can I use my excellent credit score to get a personal loan?
When you apply for a personal loan, a lender will assess your capacity to repay the money you want to borrow. To do this, one of the main factors they look at is your credit score.
Your credit score is basically an indicator of how reliable a borrower you are. The higher your score, the more likely you are to be able to repay the loan on time and in full, so if you’ve got an excellent credit score, the lender will likely view your application in a positive light.
When you apply for a personal loan from a bank or other traditional lender, having an excellent credit score will increase the chances of your application being approved. While it’s far from the only factor the bank will consider – your income, ongoing expenses, past repayment history and desired loan amount will all be taken into account – your excellent credit score will generally stand you in good stead.
An excellent credit score is also a positive for borrowers who want to apply for a personal loan from a peer-to-peer (P2P) lender. You’ll generally need a good credit history or higher to qualify for a P2P loan, while your excellent credit score will also help you access a lower interest rate.
What personal loans are available to people with excellent credit?
There are several personal loan options available for borrowers with excellent credit:
- Secured personal loans. By guaranteeing your personal loan with an asset, you can access large loan amounts and lower interest rates with a secured personal loan.
- Unsecured personal loans. If you don’t have an asset to provide as collateral, unsecured personal loans offer greater flexibility but tend to have higher interest rates.
- Car loans. You can get the funds you need to buy a new or used vehicle with a car loan.
- P2P personal loans. P2P loans allow you to access a personalised interest rate based on your credit score and credit history.
Personal loans you can consider if you have excellent credit
How can I compare personal loans?
Make sure you consider the following features when comparing personal loans:
- Interest rate. The lower the interest rate, the lower the total cost to repay your loan. Compare rates across loans to find the best value, but remember that both fixed and variable rate loans are available.
- Fees. Fees can also make a big impact on the total cost of a loan, so check the fine print for any upfront and ongoing fees that apply.
- Comparison rate. The comparison rate is calculated based on the interest rate and any fees and charges that apply. It represents the true cost of the loan and you should check this figure before applying for a loan.
- Repayment schedule and flexibility. When will you need to make regular repayments and how much will those repayments be? Also look at whether or not you can make additional repayments and pay the loan off early without attracting any additional fees.
- Loan term. Next, take a look at how long you will have to repay the loan. While short loan terms mean larger regular repayments, long loan terms mean that borrowing will cost you more in the long run.
Frequently asked questions
Am I guaranteed to be approved because I have excellent credit?
No. While having an excellent credit score will usually improve your chances of approval, it certainly won’t guarantee that the lender will offer you a loan. Each lender has its own lending criteria and will approve or deny your application based on whether or not you meet those requirements.
If I’m rejected for a loan, will my credit score be affected?
Yes. Credit enquiries remain on your credit file for five years and can negatively impact your credit score.
How can I find out what my credit score is?
You can get your credit score for free from finder.com.au.
How can I improve my credit score?
There are several things you can do to improve your credit score, including checking your score regularly, disputing incorrect listings in your credit file and consolidating your debt. Check out our guide to how to improve your credit score for more information.
What do I do if I’m rejected for a personal loan?
There are several steps you can take if your personal loan application is rejected, such as reviewing your credit file, checking to make sure you meet the criteria for any loan you apply for, and staying in stable employment for an extended period.