When applying for loans, it can be tempting to try to find the best bang for your buck! Many New Zealanders send out multiple applications to several loan vendors before choosing the loan that suits them best.

However, making a large amount of cash loan applications at once can damage your credit score; this can make it harder for you to apply for loans in future. 

What is a credit score?

A credit score (from 0 to 1,000) describes to banks, money lenders and landlords how likely you are to pay your bills on time. It is based on:

• How much you have borrowed in the past, and where from.
• Whether you have paid your debts back on time.
• How often you have applied to borrow money.
• If you’ve ever completely failed to pay money back (this will give you a very low credit score).

Companies may be worried about lending to you, or may charge you a higher interest rate, if you have a low credit score. A ‘good’ credit score’ in New Zealand is usually over 500.

You can find out your credit score here.

When you apply for loans, credit score providers notice

Loans you apply for are visible on your credit file for at least five years. 

New Zealand primary credit score providers supply these credit files to lenders if they are assessing a loan application. If you have applied for a lot of loans recently, your lender might want to know why.

Will I get a bad credit score if I’m borrowing money for high-cost goods?

Cash loans are considered on a case-by-case basis. Some people may apply for loans multiple times per year to multiple providers when needing finance for larger purchases like a car or a first first home payment; as long as you keep up with your payments, your credit score will remain high.

However, if you have applied for multiple short-term unsecured loans over a short period, you may be considered a high-risk borrower. This doesn’t mean you absolutely can’t get a loan! However, it does mean you will probably have to pay higher interest rates than someone with a higher credit score. 

So, what do loan companies want to see?

Credit loan lenders only want to loan money to clients who are reliable when it comes to repayment. A bad credit score, in combination with multiple loan applications over a short period, may indicate that you may be in financial trouble and seek quick cash payments. 

If you’re making lots of random applications, you may give providers the impression that you’re not a serious applicant. Loan providers want to invest in you! They are looking for stability and commitment.

What happens to my credit score if I apply for loans a couple of times a year?

A few loan applications per year is considered normal by vendors, so this is nothing to worry about! Good credit borrowers may still apply for 2-3 loans, but only use one at a time. If you have simultaneous loans, lenders may classify you as a high risk borrower. In this, you could consider a debt consolidation loan.

So, how should you shop for your personal loans?

You can find most loan rates on providers’ websites without needing to complete an application form. For example, the MoneyShop site has an easy-to-use slider system that can break down the amount you want to borrow and calculate repayments, annual interest rate and total interest. Using tools like this will help you decide who you want your lender to be before you bother to go through the application process.

Apply for a loan online

If you want to apply for a loan, we make the process as easy and stress-free as possible! With competitive rates, streamlined online service, and helpful loan information, the MoneyShop team are known as New Zealand’s most trustworthy loan providers. Contact our friendly team if you want to talk about small or large loan options in New Zealand.