Scared stiff: 4 million Aussies fearful of credit application

Millions of Australians are putting off accessing credit products because they fear a rejected application, according to new research by Finder.

A Finder survey of 1,070 respondents found 19% of Australians – equivalent to almost 4 million people – have not applied for a financial product in the past 12 months because they were worried they would get knocked back.

Almost one in ten (8%) – 1.6 million people – hadn't followed through on a credit card application, while 5% had side-stepped a personal loan application.

Sarah Megginson, money expert at Finder, said many people are too worried about what a rejection might do to their credit rating.

"As money has gotten more expensive to borrow, many lenders have become more scrupulous about who they'll lend it to and it's making people nervous.

"If you don't think you would meet the criteria imposed by lenders to secure the access to funding you need, you're wise to steer clear.

"Borrowing to keep things afloat could make your situation more precarious, and if you're rejected, that will be noted on your credit file, which could harm your chances of a loan in the future."

Finder's research revealed home loans (5%), car loans (3%) and phone payment plans (2%) rounded out the top 5 financial products Aussies didn't apply for due to fear of rejection.

The research found 2% of Australians avoided a Buy Now Pay Later application due to rejection fears.

Megginson said there are steps you can take to improve your chances of being approved, like avoiding things like payday loans, credit card cash advances and BNPL transactions, as lenders see these types of habits as a "red flag" that you're not able to live within your means.

She also encouraged Aussies to check their credit score before applying for a loan or product.

"Your credit score is a number between 0 and 1,000 – it tells lenders if you're good with your money or not. It's also your first line of defence against identity theft.

"A good credit score will open up better financial opportunities, such as faster loan approvals, lower interest rates and easier rental processes."

Megginson said the cost of living crisis was wreaking havoc on households' ability to access credit.

"Households in all income brackets are feeling the pinch and it's a vicious cycle.

"Those who need the credit can't access it and those who will be approved for the credit don't need it as much."

Megginson also urged mortgage-holders to hunt for a better loan rate.

"For many households, the biggest hit comes from the mortgage, so start there. Even a modest reduction of 0.25% can translate into substantial savings."

If you're struggling to keep on top of all your household costs, she also suggested consumers create a plan of action to get the situation back on track.

"If you've reached your limit on a credit card, devise a plan to begin paying it down.

"If you are eligible for a 0% balance transfer card, this could give you some breathing room, or you could call your existing credit card and ask them to move you to a card with a lower interest rate.

"If you need a hand getting your budget sorted, you can also contact the government's free National Debt Helpline on 1800 007 007."

Methodology

• Finder's Consumer Sentiment Tracker is a monthly recurring nationally representative survey of more than 60,000 respondents.
• Figures in this release are based on 1,070 respondents from February 2024.
• The Consumer Sentiment Tracker is owned by Finder and operated by Qualtrics, an SAP company.
• The survey has been running monthly since May 2019.