Does Applying for a Loan Affect Your Credit Score?
Yes, it can. When you apply for a loan, the lender usually checks your credit report, and that check is recorded as a credit enquiry. The enquiry stays on your report for five years, even if you don't take the loan. One application has a small effect, but several in a short time can lower your score and make lenders cautious.
Here's how it works and how to apply without doing unnecessary damage.
What happens when you apply for a loan
When you apply for credit, the lender asks a credit reporting body, such as Equifax or Experian, for a copy of your credit report. The request is recorded as a credit enquiry, which may show:
- The date of the application
- The type of credit, such as a personal loan or credit card
- The amount you applied for
- Whether you applied alone, jointly or as a guarantor
Source: Equifax, what is a credit enquiry.
How long credit enquiries stay on your report
Credit enquiries stay on your report for five years. This is the case whether you were approved, declined or decided not to go ahead.
Why multiple applications can hurt
One enquiry is normal. But applying with several lenders in a few weeks can suggest you're under financial pressure or being declined. Each enquiry can lower your score, and lenders reviewing your report can see every one.
That's why it pays to choose carefully and apply once, rather than applying everywhere at once.
What doesn't affect your score
- Checking your own credit score or report
- Using a lender's repayment calculator
- Reading a lender's eligibility criteria before you apply
How to apply without hurting your score
- Check your own report first, so there are no surprises. It's free every three months.
- Check the eligibility criteria before you apply, so you only apply where you're likely to qualify.
- Compare on the comparison rate and total cost, not just the interest rate. Our loan fees guide explains how.
- Apply for what you need. Ask for an amount you can comfortably repay.
- Have your documents ready, like bank statements and payslips, so your application isn't held up.
- Wait before reapplying if you're declined. Ask the lender why, fix what you can, then try again later.
What about repayments once you're approved?
Taking out a loan isn't bad for your credit on its own. Paying it on time can build a positive repayment history, which counts in your favour. Missing payments does the opposite: a payment more than 14 days late can be reported, and it stays on your report for two years.
How Jingle assesses applications
Like other licensed lenders, Jingle checks your credit history as part of every application. We also look at your current income, expenses and bank statements to make sure a loan fits your budget. See how fast you can get a loan for what happens after you apply. Approval is not guaranteed.
Frequently asked questions
Does applying for a personal loan lower my credit score?
It can. The lender's check is recorded as a credit enquiry, which may lower your score slightly. Several applications in a short time have a bigger effect.
How long does a credit enquiry stay on my report?
Five years, whether or not you took the loan.
Does a declined application show on my credit report?
The enquiry shows, but the outcome isn't recorded. Lenders can see that you applied, not whether you were approved.
Does checking my own credit score affect it?
No. Checking your own score or report has no effect.
How many loan applications are too many?
There's no set number, but several applications within a few weeks can look like financial stress. Apply with one lender at a time.
Sources
Disclaimer: This information is general in nature and doesn't take your objectives, financial situation or needs into account. Credit provided by Jingle Finance Pty Ltd ACN 132 485 066 trading as Jingle Loans, Australian Credit Licence 388143, to approved applicants only. Terms, conditions, fees, charges and eligibility criteria apply.
