When you’re looking for a new credit card, it’s important to know what the application process will be like. One question that often comes up is whether or not a credit check is required. We’ll take a look at how credit checks work and whether or not you’ll need to go through one when you apply for a new card.
Is there a credit check?
Yes. In Australia, before you’re approved for a credit card, the bank will do a mandatory check of your credit score. This is to make sure that you can repay the money you borrow responsibly and is in your best interest.
Credit providers, such as banks and lenders, often use your credit score to judge your ability to make payments on time. A high credit score suggests that you’re a lower-risk borrower, which could lead to better interest rates and loan terms.
Does the credit card check appear on your credit report?
Compulsory credit checks may not always appear on your credit file or affect your credit score.
A mandatory credit check is when a lender accesses your credit file to glimpse your borrowing history and current debt levels. This helps the company determine if you’re likely to repay a loan on time. There are two types of mandatory credit checks: hard and soft enquiries. A hard enquiry appears on your report, whilst a soft one doesn’t show up at all.
A hard credit check is required during the application process to protect both you and the issuer. The issuer wants to be sure that you are not taking on too much financial risk and thus entering into debt can become a legal issue for them if they allow someone with poor spending habits to rack up significant debt.
Check your credit score and credit report first.
If you’re planning on borrowing money in any form, such as by taking out a loan or credit card, it is such a good idea to check your credit score first.
You can obtain copies of your credit report from the 3 major credit reporting bodies in Australia. They are:
- Equifax
- Illion
- Experian
You are entitled to a free copy of your credit report every 12 months and can use this report to assess your credit score and information.
If you have checked your credit score and report, and found that you have negative listings such as defaults, court judgements or fraudulent enquiries, don’t despair. These listings may drop your credit score and effect your ability to apply for a credit card however they can be removed. Credit repair companies in Australia exist to help consumers remove negative listings from their credit report. This will increase your credit score and improve your chance of being approved for a credit card.
