A good credit score is important when applying for motorbike finance as the score and report can impact the interest rate, loan amount and application approval. The interest rate is integral to the cost of motorbike finance and that means the real cost of buying your machine. With several rate rises from the Reserve Bank this year and another not being ruled out by the markets, plus costs of living impacting most budgets, the monthly outlay for a new machine will be the priority for buyers. Central to achieving that objective is getting the best motorbike finance rate.
Key to getting the best possible interest rate is having a good credit score. Most people are aware that credit scores exist but may not know their current rating and may have no idea of how it is calculated.
Many people might think their score is pretty much out of their control. That may be only partly true. You do have at least control over the elements that contribute to your score and there may be ways that you can improve yours before you apply for finance.
If you’re considering buying a new machine and applying for a motorbike loan, now may be the time to work on improving your credit score. We explain how you may approach this and how it may pay dividends.
What is a Good Credit Score?
Credit scores are based on the entries in the credit report. Anyone who has applied for or taken out finance or held an account with a company will have a credit report and score.
Reports are compiled by Credit Reporting Agencies – Experian, Equifax and Illion. Reports contain information submitted by banks, finance companies, credit card companies and companies that charge customers for services. These include businesses such as energy companies and telcos.
Information that is submitted to the agencies includes loan applications even if the loan is not taken out, existing and past loans, loan and bill payment history, credit card limits and payments, loan defaults, bankruptcy and similar events. Under the Comprehensive Credit Reporting system introduced in 2018, both negative and positive information is reported. Having access to both negative and positive information provides lenders and credit companies with a more comprehensive view of a loan applicant.
Using a formula, the agencies calculate a score based on these entries. Depending on the agency’s system, scores range from 0 to 1000 or 0 to 1200. For 0 to 1000 systems, a good score may be considered above 500 or 625 and very good in the 700s. On the 0 to 1200 system, good is in the higher 600s and very good mid 700s to mid 800s. Excellent is in the higher 20% approximately.
How Good Credit Score Affects Loans
Credit scores are an assessment of creditworthiness and very important when applying for finance. They provide lenders with information on how creditworthy the individual is and the risk of approving a loan to that person. Lenders and credit companies access reports from the credit reporting agencies as part of the application assessment process when the applicant signs their agreement for their information to be accessed.
A credit report and scores affect the interest rate offered, loan amount approved and, in a worst-case scenario, the score can determine if an application is accepted or rejected.
The effect on interest rates is based on the risk factor. When surveying rates across the lender market, note that most will advertise their best rate for new goods for good credit applicants. There can be variations in the credit scores that lenders will accept to approve loan applications. We assist by matching applicants with lenders that best suit their profile as a first step towards being offered the best possible rate.
Applicants with a score below a lender’s accepted threshold can expect to be offered a higher rate. This will impact both the monthly loan payment and the total amount of interest that accrues on the loan over the finance term, effectively adding to the cost of buying a motorcycle with finance. To see exactly how the interest rate impacts the monthly payment and the total interest, work up some combinations on our Motorcycle Finance Calculator.
Scores can also affect the amount approved for the loan. This may then flow through to how much the buyer needs to make a deposit on their motorcycle. Lenders will be looking at the size of the loan in total and also as a percentage of the price of the machine when the motorcycle is used as collateral for a Secured Motorcycle Loan.
Achieving a Good Credit Score
If you have a good credit score you’ll want to keep it or try to improve it to very good or excellent. If you are in the less than good category, there may be actions you can take to improve your score. The objective will be to build up the positive entries in your report and minimise the negative.
Paying bills and meeting loan payments on time is very important. If many of your regular bills are by automatic direct debit, keep a note of when the funds are due to come out of your account and make sure there is sufficient funds on that day.
Address your credit card limit. Not the balance, how much you currently owe, but the limit, how much you are approved for. Lenders can consider the limit on credit cards as potential debt and as a negative. If you don’t need as much as you have, contact the credit card company and have the limit reduced.
Reducing debt levels may contribute to a better score. If planning to apply for a new loan, consider finalising any existing loans first.
While a good credit score will be a major contributor to achieving a good interest rate, with our access to a large lender base, we assist all buyers to achieve their best possible rates on motorcycle finance.
With or without a good credit score, buyers can contact Jade Bike Loans to source their most competitive interest rate motorbike finance. Call 1300 000 003.
DISCLAIMER: IN REGARD TO ANY ERRORS OR MISREPRESENTATIONS IN THIS MATERIAL, NO LIABILITY IS ACCEPTED. THE DETAILS, CONTENT AND DATA IS PRESENTED PURELY FOR GENERAL INFORMATIONAL PURPOSES FOR MOTORBIKE BUYERS AND THOSE SEEKING MOTORCYCLE LOANS. THIS IS NOT INTENDED AS THE SOLE SOURCE OF INFORMATION FOR FINANCIAL DECISIONS. IF SPECIFIC ADVICE IS REQUIRED AROUND FINANCIAL DECISIONS, READERS SHOULD SEEK THEIR OWN FINANCIAL ADVISOR.
