What is credit?
Credit is the ability to borrow money with the promise to pay it back later. It's different from debit, where you're using funds already available in your account.
Different types of credit include:
- personal loans and home loans
- credit and store cards
- education loans like HECS-HELP
- hire purchases
- short term or ‘pay day’ loans
- mobile phone and internet services
- utilities like electricity, gas and water.
When you agree to repay credit, you're taking on a commitment. Failing to repay credit that you owe can impact your creditworthiness and credit score.
What is creditworthiness?
Creditworthiness is all about how suitable someone is to receive credit. It's a way for lenders like NAB to determine if you're likely to pay back what you owe and if you've got the funds to manage future payments. In short, it's about trust and reliability when it comes to handling mone.
To be considered creditworthy, you need to have:
Being creditworthy is more than just a financial status—it’s your ticket to better loan terms and potentially lower interest rates. It's a big deal for us too. We're all about responsible lending, and checking your creditworthiness is how we keep things safe for both of us. You can improve your creditworthiness over time if you find it’s not where you want it to be.
What do we look for to determine creditworthiness?
When you apply for credit, we look at lots of different factors to determine your creditworthiness. Here's what we consider:
- Steady income that shows you have money coming in regularly.
- Assets you own, like a house or a car.
- Any debts you have owing, like an outstanding credit card balance or personal loan repayments.
- A savings habit that reflects your ability to put money aside.
- Your credit report, which gives us the full picture of your credit history and how you've handled loans and credit in the past.
Your credit report
This is your history of credit applications and interactions. You can ask for a copy of this file to see where you stand – and to ensure your information's accurate.
The credit reporting bodies we use are:
Your income and savings
Simply put, we’re looking for proof of steady, regular income—each week, or each month. It’s also important to know whether you put some of your income aside each month. Even a modest bank account with a short savings history suggests you’re a reliable borrower.
Your assets
Retirees, for example, may not have high incomes, but may have significant assets in reserve. So long as these are reasonably liquid, they’ll boost your creditworthiness.
Your debts
It may seem odd that debt can make you more creditworthy. However, banks like to see evidence of your ability to manage debt and pay things down. That said, it’s a question of balance, and it’s important your debts are well within your capacity to handle and you can reliably pay back what you borrow.
Why does creditworthiness matter?
It matters to you
Used responsibly, credit can get you to where you want to be, quicker than you might think, but it’s important that you don’t take on debts you can’t afford and risk financial distress.
By taking care of your creditworthiness, we can help you grow your financial achieve your financial goals and grow.
It matters to us
Lending recklessly isn’t good for us, for our shareholders, or for our community. But most importantly, it isn’t good for you.
That’s why creditworthiness matters to us. We take our role as responsible lenders very seriously.
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The information contained in this article is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, NAB recommends that you consider whether it is appropriate for your circumstances. NAB recommends that you seek independent legal, financial and taxation advice before acting on any information in this article.