Loan Applications – Protect Your Credit Score (2026)

For many Australians, applying for a loan is a step towards achieving significant life goals, whether it's purchasing a home, financing a car, or starting a business. However, a common concern that arises during this process is whether these applications can negatively impact one's credit score. Understanding how loan applications affect your credit score is crucial in maintaining healthy financial standing. Let's delve into this topic with clarity and confidence.

Understanding How Loan Applications Affect Your Credit Score

In Australia, your credit score is a numerical representation of your creditworthiness, which lenders use to evaluate the risk of lending you money. It's essential to understand the interplay between loan applications and your credit score to make informed financial decisions. When you apply for a loan, lenders conduct what's known as a "hard inquiry" or "credit check," which can have an impact on your credit score. This is distinct from a "soft inquiry," which does not affect your score and occurs when you check your own score or when lenders conduct pre-approvals.

Credit Score Impact: Rates, Requirements, and Options

The impact of a loan application on your credit score varies and depends on several factors, including the frequency of applications and your credit history. Let's explore these factors further:

As of 2026, interest rates in Australia for personal loans range from 6.49% to 12%. These rates can influence your decision to apply for a loan, as well as the type of loan you choose. Consideration of these rates alongside the potential impact on your credit score is vital. Each loan application can lower your score by a few points, but the effect is usually temporary if managed properly.

Steps to Minimise Credit Score Impact

To apply for a loan without significantly affecting your credit score, follow these steps:

1. Check Your Credit Score: Before applying, obtain a copy of your credit report to understand your standing.
2. Research Lenders: Use Esteb and Co's access to 83+ lenders to find options with favourable terms without submitting multiple applications.
3. Limit Applications: Apply only for loans you are likely to be approved for to avoid unnecessary hard inquiries.
4. Consider Pre-Approval: Some lenders offer pre-approval, which can give you an idea of your eligibility without affecting your score.
5. Space Out Applications: If multiple applications are necessary, space them out to mitigate the impact on your credit score.

Expert Tips and Considerations

Here are some expert tips to maintain a healthy credit score while applying for loans:

• Maintain a Good Credit Mix: Having a mix of credit types, such as credit cards and loans, can positively impact your credit score.
• Regularly Monitor Your Credit Report: Stay informed about your credit status and dispute any inaccuracies promptly.
• Keep Credit Utilisation Low: Use a small percentage of your available credit to maintain a healthy score.
• Pay Bills on Time: Consistent, timely payments are crucial for maintaining a strong credit history.
• Seek Professional Guidance: Consult with a mortgage broker from Esteb and Co to navigate the complexities of loan applications effectively.

Frequently Asked Questions

1. How long does a hard inquiry stay on my credit report? Hard inquiries typically remain on your credit report for two years, but their impact diminishes over time.
2. Can I check my own credit score without affecting it? Yes, checking your own credit score is a soft inquiry and does not impact your score.
3. Do multiple inquiries always lower my credit score? Not necessarily. If inquiries are for the same type of loan within a short period, they may be treated as a single inquiry.
4. What is a good credit score in Australia? A score above 700 is generally considered good, while a score above 800 is excellent.
5. How can I improve my credit score? Focus on timely payments, low credit utilisation, and maintaining a diverse credit mix.
6. Is it better to apply for a loan with a bank or a non-bank lender? It depends on your specific needs and financial situation. Consider the terms and interest rates offered by both.
7. Can I remove a hard inquiry from my credit report? If the inquiry is legitimate, it cannot be removed. However, you can dispute inaccuracies with the credit reporting agency.