If you’re planning to apply for a home loan, car loan, or even a personal loan, one of the most important things lenders will look at is your credit score and your serviceability — that is, your ability to repay the loan.
Many first-time borrowers don’t realise that even small financial habits can impact loan approvals. In this blog, we’ll explain what banks look for, how credit scores are affected, and how to prepare your finances so you’re ready when it counts.
Your credit score is a number that represents how reliable you are with credit. It’s calculated based on your repayment history, the types of credit you’ve taken, and how well you’ve managed them. In Australia, credit scores usually range from 0 to 1,200.
The higher your score, the lower the risk for lenders.
When you apply for a loan, banks don’t just look at your income — they look at your full credit file, including:
Active credit cards (even unused ones count against you)
Buy Now Pay Later accounts (Afterpay, Zip, LatitudePay, etc.)
Personal loans and car loans
Store finance (e.g., interest-free furniture or electronics loans)
HELP/HECS debts (student loans)
Previous loan applications (too many in a short time can hurt)
Late or missed payments (even one can lower your score)
Defaults and unpaid debts (including small amounts)
💡 Tip: Just because you’ve paid off a loan doesn’t mean it disappears — it may still show up as an active facility unless officially closed.
A lower credit score doesn’t just mean possible rejection — it can also:
Reduce how much you can borrow
Lead to higher interest rates
Require a larger deposit or guarantor
Some lenders may accept lower scores, but with stricter loan conditions.
Even if you haven’t used your card in months, banks assess the full limit, not the balance. So a $10,000 card = $10,000 liability, even at $0.
✅ Solution: Close unused credit cards before applying.
Making only minimum payments (especially on credit cards) signals poor repayment behaviour, and the interest accumulates fast.
✅ Solution: Pay more than the minimum or pay off in full each month.
Afterpay, Zip Pay, and similar services are credit accounts. They appear on your report and can hurt both your credit score and serviceability.
✅ Solution: Limit the number of BNPL accounts and avoid relying on them.
Old purchases from stores (e.g., Latitude, Harvey Norman) may still show as open lines of credit even if you’ve paid them off — especially if not closed properly.
✅ Solution: Request a closure confirmation and ensure they’re removed.
Frequent job-hopping or moving houses can raise stability concerns for lenders.
✅ Solution: Try to maintain steady employment and residency for 6–12 months before applying.
Keep your credit usage below 30% of your limit
Avoid applying for multiple loans or credit cards in a short period
Set up direct debits to ensure on-time payments
Get a copy of your credit report from Equifax or Illion (it’s free once a year)
Avoid guaranteeing someone else’s loan unless you fully understand the risks
Understanding how credit scores work is essential. Learn more from ASIC’s MoneySmart guide to borrowing basics or see how lenders view your report on Equifax Australia.
At Kanova Loans, we help you understand your credit health, reduce unnecessary debt, and structure your loan application the smart way. Whether you’re just starting your financial journey or ready to buy your first home, we’ll guide you every step of the way.
Book a free call with Anitha Varghese today — and take control of your credit. »
Disclaimer: This blog is for general information only and doesn’t constitute personal financial advice. Always consult a licensed financial advisor or mortgage broker for advice tailored to your situation.
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Kanova Loans helps Australians access home, car, and commercial finance through expert guidance and top lender comparisons — led by trusted senior mortgage broker Anitha Varghese.
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