If you’ve seen any of our ads, you’ll know that we can find you low interest rates on car loans.
That doesn’t mean we can do it for every single applicant. It’s important to remember that we’re a brokerage; we don’t fund the loans ourselves, we speak to our panel of lenders to find the best deal for you.
It can be a shock to some people when they’re expecting 6% or so to be given a quote over 10%. So shocked that our social media inboxes get filled with all sorts of colourful language that we’ve never seen before.
So what’s happening? In most cases, it’s because of an applicant’s bad credit.
What is a credit score?
A credit score is one of the key ways lenders assess their applicants. Your credit rating is based on your financial history. Factors like debt, repayment history and defaults all go towards your score.
There are two different reporting bodies in Australia (there were three, but Experian acquired Illion in 2025). Lenders normally look at just one, but there’s no telling which one it’ll be. You can get a free report once a year from each of these:
In both systems, a higher score is better.
Why does bad credit impact my borrowing rate?
Lenders give loans (or don’t) based on risk. If they’re worried that you won’t pay them back, they’re unlikely to approve your loan. The higher the risk, the higher your interest rate.
You’d probably be the same. If a mate asked to borrow money, you’d be more likely to lend it to them if they were reliable. If their repayment plan hinges on winning on Keno, you might be better off saying no.
How do I improve my credit score?
If you’ve enquired about a car loan and you’re not happy with the interest rate or the amount you can borrow, there’s not much you can do to change that right now. Improving your credit score is a gradual process that takes a few months but every journey begins with a single step, so how do you get started?
Pay bills on time
This step has double benefits: Paying bills on time improves your credit rating and not paying them on time makes it worse.
This means all your bills. Any loan you’ve taken out, your rent/mortgage, any buy now pay later scheme and your phone, electricity and gass bills. Setting automatic direct debits can help with this.
If a payment is more than $150 and more than 60 days overdue, it gets marked as a default on your credit score and that’s a huge black mark that stays there for five years.
Think about it. If you’ve been late paying back other commitments, a lender is going to be worried that you’ll be late paying them back too.
Contact the people you owe money to
If you’re struggling to pay your bills, be upfront about it. Lenders often have ways to help people when they’re having difficulties and it’s always better to be upfront about it.
Again, imagine you’d given a mate some money. If they let you know they were short this month but they could pay you next month when money came in, you’d appreciate the heads up rather than them going silent for that month.
Be careful with what you apply for
Applying for loans and credit cards isn’t bad in itself. Many Australians do this every year. But when you are constantly applying for these things it can raise a red flag. Either it means you’re getting rejected (not great) or that you’re managing your finances poorly and desperate for money (not great).
If you have multiple loans or credit cards, it can be helpful to take out a debt consolidation loan to make things easier to manage. This can get you a lower interest rate on your existing commitments and make it easier for you to schedule repayments.
Double check your credit reports
Although rare, there are times when the credit reporting agencies make mistakes. Read through your report and make sure that:
- Everything listed is related to you (and not, for example, someone with the same name or who used to live at your address)
- Any debts that you don’t know about (potential identity fraud)
- Debt listings that have been doubled up
Know that credit cards don’t help you
Credit cards can be great in an emergency or if you have a solid strategy to pay them off regularly. But unlike the American system, taking out a credit card just so you can make repayments doesn’t build your score in any meaningful way.
In fact, just having a credit card can negatively impact your loan application. Even if your balance is at zero, many lenders will look at the credit limit you’re allowed and take that into account, often decreasing the amount they’ll lend to you.
Build up a savings account
While having savings won’t in itself improve your credit, it does give you a buffer. We’ve all had times when the bills seem to come piling in and there’s no relief in sight. If you have to wonder which one you can actually pay, it can be incredibly stressful and daunting. Having rainy day funds helps relieve this pressure and means you can avoid defaults.
In a best case scenario, you may be able to avoid spending it and suddenly you’ve got a handy deposit for the next car you want to buy.
Getting the best available car loan
If you’re looking to buy a car but you’re not sure about your finances, we can help. Our research services are free. We’ll take your information and see what the best lenders in the country are willing to offer you. Best of all, we do ‘soft touches’ so these enquiries won’t appear on your credit report.
If you like what we’ve found you, we can go ahead and make an application on your behalf. If the rate’s a bit high, you’ve got no obligation to proceed. Just step away, work on improving your credit, and come back in a few months when things are looking better.
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