If you’re looking to purchase a motorcycle but will be relying on a vehicle loan to do so, you will need to meet the lender’s eligibility criteria to gain approval. Generally speaking, this will involve having a credit score in the ‘good’ to ‘excellent’ range.
How lenders assess your credit score
The typical loan application requires borrowers to submit documentation of their income, any ongoing expenses (such as a credit card) and their savings. In addition, lenders will typically request permission to access the applicant’s credit history – also called a hard credit check - and credit score.
Your credit score is a number that represents your creditworthiness, and the likelihood that you’ll make your repayments on time. This is determined by information in your credit history stored by Australia’s credit bureaus, including:
- Credit products you’ve applied for,
- The credit limit of each product,
- The types of credit providers that have made hard enquiries on your account, and
- Any negative events, such as defaults.
Two of the biggest credit reporting bureaus in Australia are Experian and Equifax. The lender you apply for a car loan with will request a copy of your credit history from one or both credit bureaus. Your credit score will sit in one of five categories of risk:
Credit score bands | Equifax | Experian |
Below average | 0 - 579 | 0 - 549 |
Average | 580 - 669 | 550 - 624 |
Good | 670 - 739 | 625 - 699 |
Very good | 740 - 799 | 700 – 799 |
Excellent | 800 - 1200 | 800 - 1000 |
Source: Equifax.com.au, Experian.com.au.
Applicants who don’t have any history of defaulting on past debt are more likely to have a credit score in the ‘good’ to ‘excellent’ range. For lenders, such a credit score suggests a higher chance of recovering the loan amount in due time from the borrower.
Put simply, the higher your credit score, the more likely a lender may approve you for a motorcycle loan.
Can you get a motorcycle loan with a bad credit score?
If your credit score is in the ‘average’ or ‘below average’ category, your application may be more likely to be rejected. There is still a chance you may have a favourable assessment, depending on the lender. Although you may want to investigate why your credit score sits in this range, and prioritise boosting your credit score before you apply.
Also, you may want to consider checking if there are specialist motorcycle financiers you can apply to, as lenders who offer general vehicle loans may not have well-defined criteria for motorcycle loans. However, beware of the interest rates with these loans as they may be higher than average to help mitigate the risk involved with lending to an applicant with a poor credit score.
If you are willing to put off buying the motorcycle for some time, you can work on improving your credit score and then apply for the loan when you are in a better position. Apart from strengthening your loan application, boosting your credit score may also help you qualify for better interest rates.
A lower credit score may require the lender to comb through your application more thoroughly, and perhaps even ask for additional documents to prove your income. You may be able to discuss your credit situation with them - for instance, if there are incidents listed on your credit report that you have managed to resolve. Typically, lenders may recommend taking steps to build up your credit score before applying for a motorcycle loan.
