Understand why your application was rejected so you can make small changes to help get your next application approved.
Why your loan application may have been rejected
Being turned down for a loan can feel stressful. You might worry about what it means for your future or how you’ll cover an urgent cost. You’re not alone — many people go through this.
A rejection doesn’t mean you’ll never get credit. It simply means the lender couldn’t approve your application this time. You can take steps to understand what happened and improve your chances next time.
A lender may reject your loan application for one of these reasons:
Information on your credit report
Your credit report is a record of your credit history. It includes things like your credit rating, the credit products you hold, and your repayment history.
Lenders look at your credit history to decide whether to give you credit or lend you money. They may reject your loan application if they see:
report late or missed repayments
report unpaid debts
report many recent credit applications
report a default or serious credit infringement
Your current financial situation
Lenders look at your income, bills and other commitments. They may say no if:
- your income is too low for the loan amount
- your expenses are high
- you have other debts that reduce your capacity to repay
Lenders must follow responsible lending obligations. They can't lend you money if they think that you won't be able to make the repayments.
Even if you feel confident you can repay the loan, a lender must decline it if their assessment shows it could cause hardship.
Improve your next loan application
Follow our steps to help improve your chances of getting approved next time you apply for a loan.
1. Ask the lender why they said no
Lenders have to tell you if they reject your application because of your credit report.
2. Check your credit report
You can get a copy of your credit report from a credit reporting body every three months, or more frequently if you provide evidence that you have been rejected for credit recently. So, check that your credit report has no mistakes and that all the debts listed are yours. Get the credit reporter to fix any wrong listings so these don't lower your credit score.
You may see ads from credit repair companies offering to fix errors on your credit report about credit products. But you don't need to pay a credit repair company to clean up errors in your credit report. They may charge you high fees for things you can do by yourself for free. Paying a credit repair company may not improve your credit score.
3. Work on reducing your debts
Keep up with your loan repayments, and make extra repayments where you can. See get debt under control to know which debts to start with.
4. Create a budget
Lenders look at your income, expenses and savings to see whether you can keep up with loan repayments. Start a budget to see what you're spending and where there's room to save. This can also help show lenders you can manage money well.
5. Wait before applying again
Each application for credit is noted on your credit report. Too many applications in a short time can lower your credit score. Give yourself time to improve your situation first, before applying again. ‘Also, listings on your credit report expire. For example, default listings expire 5 years from when it goes on your credit report.
Loan-ready checklist
check_box I know why my last application was rejected.
check_box I’ve checked my credit report and fixed any errors.
check_box I’ve paid down some debts or set up a repayment plan.
check_box I’ve reviewed my budget and reduced unnecessary spending.
check_box I’ve built a small savings buffer.
check_box I’ve waited at least a few months before applying again.
check_box I’ve chosen a loan amount that fits my income and expenses.
check_box I’ve compared lenders to find one that suits my situation
If you need money urgently
There are services and community organisations that can help if you need money urgently.
No Interest Loans (NIL)
If you’re on a low income, you may be able to borrow up to $2,000 for essentials like appliances or medical costs, or up to $3,000 for housing‑related expenses, through a No Interest Loan.
Because there’s no interest, fees or charges, you only repay what you borrow.
Advance Centrelink payment
If you receive Centrelink payments, you may be able to get an advance payment. This can help you to cover an unexpected cost in the short term without interest or fees.
Get urgent money help
If you're in a crisis situation or struggling to pay for everyday expenses like food or accommodation, get urgent help with money.
Be aware of lenders that say they lend to people with bad credit or low income. These types of lenders may charge high interest and fees, borrowing from them might put you in a worse position. Always make sure the lender is a member of AFCA.
Alisha's car loan
Alisha wanted to buy a used car, so she applied for a $10,000 personal loan at her bank. Her job in retail paid enough to cover her rent, bills and the loan repayments.
But the bank rejected her application, because she had no savings and a $2,000 credit card debt.
Alisha decided to pay off her credit card and build up some savings before applying for another loan.
She started a budget and tracked how much she was spending. She cancelled her unused gym membership and online subscriptions, and cut down on eating out. By making these changes, she saved $200 a week.
She used the $200 to make extra repayments on her credit card debt. When her credit card was paid off, she had more money to put towards her savings goal. These changes helped Alisha get her next application approved.
If you're finding it hard to borrow money because of your debts, talk to a financial counsellor. It's free and they can help you to get your finances back on track.