Personal loans credit check guide |

Personal Loans – Credit Check

There’s a lot of talk around it - but how important is your credit history when applying for a personal loan?


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A personal loan is when a financial lender lends you money for personal use. Personal loans can be used for many different reasons and aren’t limited to one area. There a lot of different types available, but your credit rating plays an important role in what type of personal loan you will be approved for and what ones you have access to. The majority of personal loans require you to have a good credit history and a bad credit history or negative marks can limit your options.

How do personal loans work?

Personal loans are extremely common and work like any other loan. The financial lender will lend you a certain amount of money so you can make the purchases or pay the expenses you need to. Your lender will set out how much you borrow and the specific terms of your loan including your interest rate. You then pay back the loan in regular instalments, including interest.

Personal loans are widely available from banks, lenders and credit unions. They can be used for almost anything. From paying bills, to purchasing a car or going on a holiday. When you take out a personal loan, you will be required to make repayments. Repayments are typically made monthly but in some cases they can be made weekly or fortnightly too. Your repayment is made up of your principal (the original amount that you borrowed) and the interest accumulated on this original amount.

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How does your credit affect your ability to access personal loans?

Your credit file affects your ability to access personal loans significantly. Before a lender approves you for a personal loan, one of the requirements is checking your credit file. The financial lender will examine your file and check for any bad marks or warning signs such as late payments, loan defaults or bankruptcy. Your credit history is one of the lenders best indicators of your ability to make repayments based on your past with credit. Credit history is typically indicative of your capacity to successfully make repayments and your past dealings with credit. If you do have a bad credit history and any negative marks on your file, it will limit your options for accessing personal loans and may lead to you getting rejected. You may still be able to be approved for a personal loan if you have a bad credit history but it will be more difficult.

Personal loan options with bad credit

If you do have bad credit, there are still some options available to you to get a personal loans.

  • Debt consolidation loans. If you do have bad credit, consolidating all your debt into one loan could be a good option. This will help you better manage your repayments and if done correctly lower your interest and fees.
  • Payday loans. Payday loans offer you a small amount of money (up to $2,000) over a short period of time. Payday lenders are typically more flexible in their application criteria and will consider lending you money even if you do have bad credit. However, they tend to have much higher fees and charges.
  • Secured loans. With secured loans, you use an asset of yours as collateral. Secured loans are a popular option for those with bad credit and you may be more successful when applying for a secured loan. This is because the bank has the security for the loan so your credit history isn’t as relevant as with other loans.
  • Bad credit lenders. Bad credit lenders are much more flexible in their application criteria. They specialise in lending to those with bad credit so they are a viable option for a personal loan for those with bad credit.

Improving your chances of being approved for a personal loan

Fortunately, there are some ways to assist you improve your credit and improve your chances of being approved for a personal loan.

  • Regularly check your credit file. Ordering your credit file and regularly checking it is a good way to monitor your credit and pick up on any errors. This can in turn improve your chances of being approved for a personal loan.
  • Pay bills on time. Paying your bills late directly impacts your credit file. By making sure you always pay your bills on time and maintaining your credit rating, this will improve your chances of approval.
  • Consolidate your debt. Consolidating your debt into one and slowly getting in control of your repayments by chipping away at it will assist you in improving your chances for approval. If you consolidate your debt and get your debt situation in control, your credit file will reflect this in due time.
  • Credit repair. You may also consider credit repair. Credit repair are specialists who look through your credit file, pick up on any errors and have them removed from your credit file. Your bad credit may be a mistake from a lender and this can be picked up through credit repair. Fees are often involved.
  • Control your credit cards and spending. Many people fall into credit trouble through the use of credit cards. To improve your chances of approval, make sure you control your spending, make credit card payments on time and don’t spend beyond your means.

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Types of general personal loans

  • Secured loans. Secured loans require you to use an asset of yours as security for your loan. If you fail to make your repayments, the lender can repossess the asset. These loans are more secure and the interest rate tends to be lower. They can be a good idea for someone with a bad credit rating.
  • Unsecured loans. Unsecured loans don’t require you to use an asset of yours as collateral. This type of loan tends to be a higher risk to borrowers which is why the interest rate tends to be higher. To be eligible for this type of loan you typically need a good credit history.
  • Fixed loans. Fixed loans are very secure. This is where an interest rate is locked in for a specified term of 1-5 years. During this fixed term, your interest rate and your repayments can’t change. However, fixed loans tend to not have as many features. They could be a good idea for someone who has had trouble with repayments in the past as it allows you to budget.
  • Variable loans. With variable loans your interest rate fluctuates with interest rate announcements. They tend to have a slightly lower interest rate but you must be prepared for interest rate increases. They also tend to be more full featured.
  • Car loans. Car loans are loans that are designed specially for those purchasing a car. They give you the funds to purchase the car and can be secured or unsecured, typically using the car as collateral. There are a few different car loan options for those with a bad credit rating.
  • Payday loans. Payday loans are smaller and shorter term loans. They have a fast turnaround and you can typically get the funds within 24 hours, this is why they are called payday loans. You can borrow up to $2,000, however, they tend to have higher interest rates and should only be considered in emergency situations.
  • Debt consolidation loans. Debt consolidation loans allow you to consolidate all your debts into one loan. It allows you to be in control of your debt and typically get a lower interest rate.

If you have bad credit, you'll find that applying for a personal loan is no easy task. However, there are steps you can take to slowly improve your position so you'll look more favourable to lenders. Patience and diligence is the key to getting your financial life back into shape, so you have more options when it comes to loans.

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2 Responses

    Default Gravatar
    Nigel SchultzApril 10, 2018

    What is my credit score?

      Default Gravatar
      NikkiApril 10, 2018

      Hi Nigel,

      Thanks for your message and for visiting Finder.

      You may request for your credit score through Finder. Simply enter all the correct data listed in your driver’s licence to get your credit score.

      Hope this helps! Feel free to message us anytime should you have further questions.


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