Understanding the role of your credit score when you apply for accounts and loans

When you’re making big financial decisions, such as applying for a personal loan or even simply switching telco providers, it’s important to understand the impact your credit score has and how it’s in turn affected.

Why your credit score matters when making applications 

Creditors and lenders can sneak a peek at your credit score and credit report, in conjunction with their own lending criteria, before they approve (or sometimes deny) your applications. And every time a financial service provider contacts a credit bureau (such as Equifax) to request your credit report for a further insight into your financial history, that can have an impact on your credit score too.

Why? Well, first your credit score itself is determined based on the information held within your credit file by the bureau. Information such as credit enquiries - how many applications you’ve made and over what period of time – is captured there. Even if your credit score isn’t brought down by too many applications, those applications will become a part of your credit history and remain there for 5 years. 

Too many applications for credit can be seen as a sign that you’re struggling financially. Providers may worry you’re taking on too many new accounts or “churning” credit cards – that is, applying for new cards to take advantage of low balance transfers or other sign-up offers. A card issuer may reject your application if they think you’ve applied for too many other cards recently, even if you didn’t take up those offers.

An Equifax Credit History study of over 1,000 Australians[1] found that in the 12 months prior to September 2018, 60% of Australians had made at least one account application or account switch that could have included a credit history check. More than one in four (27%) had specifically applied for a loan or credit card in the last 12 months.

With the same research showing that 40% of Australians feel anxious about their finances and 27% are worried about their level of debt, it’s timely to reassure you that it’s easy to make positive financial changes without worrying it’ll affect your credit score long-term.

Which applications or switches count?

Changing providers

These changes typically involve a credit check:

  • Switching your mobile phone service
  • Switching utilities or internet service
  • Switching your financial institution or mortgage lender

Completing applications

The following applications almost always involve a credit check:

  • Applying for buy now, pay later finance
  • Applying for a credit card
  • Applying for a personal loan
  • Applying for a mortgage
  • Applying for a balance transfer on credit card
  • Applying for a car loan

What you can do instead

It’s always smart to make new applications only when required. When you’re considering opening new accounts or changing providers, do all of your research first and find your chosen provider before applying to them, as opposed to applying to a range of different providers. Definitely avoid making any new applications if you’re getting your finances in order for a major application, such as a home loan or a business loan.

The good news is, so long as you’re responsible with your loan repayments (i.e. meeting your regular monthly repayments every month) these actions may positively influence your credit score over time.

Knowing and understanding your credit score is an important part of staying on top of your finances. Your credit score is what some lenders may look at when deciding if you’re a good loan risk. Make it a habit to monitor your credit score for FREE regularly.


Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstance before acting on it, and where appropriate, seek professional advice from a finance professional such as an adviser. 
GetCreditScore Pty Ltd (GCS) ABN 96 169 886 891, Australian Credit Licence 501455.


1 Report: Equifax – Credit History, September 5, 2018.