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Preparing to obtain credit

Tips, strategies and factors to consider when arranging credit

Whether or not you will be able to obtain credit will depend on many factors such as the stability of your job, your salary figure, the number and extent of any existing financial commitments, the number of dependents you have and your credit history. In addition, individual lenders may apply their own criteria to assessing your application, and each type of credit comes with its own range of complications and factors to consider. Nevertheless, whatever your circumstances and regardless of the lender or type of credit you're preparing to obtain, the following tips apply.

  1. Take as much time as you want before signing on the dotted line. No one has the right to rush you.
  2. Work out what you have left after paying your living expenses and other credit commitments to make sure you can afford any more credit payments.
  3. Since interest rates vary a great deal, shop around.
  4. Make sure you fully understand the contract before you sign it. Ask for advice from someone not connected with the credit provider, if you need it.
  5. Don't leave any blank spaces on the contract.
  6. Read all the information you are given about your rights and responsibilities.
  7. Keep all the documents in a safe place with the contract. Refer to them if necessary.
  8. The faster you pay back the loan, the less you will pay.
  9. The more you pay up front as a deposit, the less you will pay.
  10. Find out whether there is a penalty if you want to increase the repayments or pay out the loan early.
  11. If an insurance premium is included in the loan, you will pay interest on it. Make sure you understand what cover is provided by the insurance.  Don't automatically accept the insurance policy offered by the credit company. Shop around for the best deal.
  12. If you get into difficulties with your repayments, contact the credit company immediately. You may be able to find a solution that suits both of you.
  13. Always read the fine print.
  14. If it sounds too good to be true, then it probably is!

This information is based on the Credit Checklist in The Complete Consumer: the Choice/Investigators practical guide to your consumer rights by Jan Bowen and the Australian Consumers' Association (ABC Books, 1993). DOCEP gratefully acknowledges the assistance of these organisations in being allowed to reproduce the information.