Amongst other things, gambling, or high-risk transactions, are now considered spending habits that lenders may take into consideration when assessing applications for finance.
What to look out for?
Potentially falling into the trap of gambling excessively can be a red flag to lenders as they may believe that you will not have sufficient funds to cover your loan repayments with them.
Gambling can indirectly impact your credit score. If you fall into the habit of spending the majority of your income on gambling, this may leave little room for your other financial commitments. This could result in missed loan repayments or even worse consequences like defaults on your credit file.
Tips to help you increase your chances of getting a loan
- Perhaps you could try working towards quitting gambling all together.
- If you are gambling, you may want to set yourself a limit.
- You may want to consider seeking professional help if you suffer from a gambling addiction.
A night at the casino, spending a few dollars in the pokies at the pub, betting some spare cash on the footy or the dogs — we’ve all done it! And for most of us, it’s just harmless fun. But the reality is there are many dangers lurking behind the odd gamble.
What is a Credit Score?
Your credit score is a number between 0 and 1,000 (or 1,200, depending on the credit bureau). It reflects your likelihood of repaying credit. A score above 700 is considered very good, and can significantly raise your chance of being approved for a loan.
The credit score is made up of various components:
- Repayment history — This includes your past credit repayments, including things like phone and utility bills. Making a late repayment every so often isn’t generally going to weigh too heavily on your score. However, if you’re in the habit of paying late or missing repayments altogether, your credit score will likely take a hit.
- Available credit — If you have been extended credit through products such as credit cards or a line of credit, your total credit limit will be taken into account to determine your score, as well as your unused portion of that credit.
- Credit types — Your score may be calculated based on how many different types of credit you have. Successfully managing different types of credit, such as a mortgage, credit cards, and a car loan, can help boost your score.
- Length of credit history — The length of time you’ve had credit can also influence the credit score. For example, someone who has had a credit card for two months may not have had the time to demonstrate their creditworthiness compared to someone who has been making their credit card repayments on time for two years.
- Hard enquiries — A hard enquiry occurs when a lender checks your credit report to assess your submitted loan or credit application. A large number of hard credit enquiries can negatively impact your credit score because it may suggest that you’ve applied for multiple forms of credit and may have been rejected multiple times. For example, if you’ve applied for a credit card through multiple avenues, you would have likely had multiple hard credit enquiries performed on your credit file.
Gambling and Credit Score
Placing a bet will generally not directly impact your credit score at all! But don’t get too excited just yet — gambling can indirectly affect your credit score.
If your gambling habit has gotten to a point where you are chasing your losses, you could find yourself missing monthly repayments for your existing bills or finance obligations. As we saw above, failing to pay your bills can negatively affect your credit score. If you get to a point where you’re applying for credit and taking out loans to fund your gambling habit, your score could significantly decline. This may be due to the hard credit enquiries, short credit history of the new loans, and late payments.
In addition, credit card providers may charge a cash advance fee on any funds used for gambling. This fee can be as high as around 30%. Paying fees this high just to gamble can quickly lead to defaulting on existing loans.
Gambling and Addiction
For most of us, gambling is just a bit of fun. But for others, it can become compulsive or pathological and has the potential to ruin your financial situation. Once gambling addiction begins, it’s often extremely hard for the gambler to stop. Out of control gambling addictions can lead to things like bankruptcy, job loss and other significant losses and breakdowns.
Gambling Reduces Your Borrowing Capacity
If you’re looking to apply for a mortgage or another type of large loan, naturally, you’ll want to be able to borrow a large enough sum of money. Your borrowing capacity is the amount that lenders deem you able to afford. And gambling can play a huge role in diminishing that amount.
Included in monthly living expenses
If you’ve ever submitted a credit or mortgage application, you might remember having to provide a figure for your monthly living expenses. While many people may not think to include gambling in their living expenses, it is an expense that a lender will usually certainly want to look at it.
Gambling is often categorised under “entertainment” by lenders. Still, it is treated differently than more innocent types of entertainment —like going to the cinema — purely because gambling comes with much higher risks.
A gambling addiction is one of the more serious risk factors, but you don’t need to be addicted to gambling to be exposed to the risks. One large bet can be all it takes to lose a significant amount of cash — and with gambling online available 24/7, the temptation and risk is higher than ever before.
Reduces your deposit
If you’re thinking about borrowing money to purchase a house, you will know that you need to have a sufficient deposit saved up. If you are spending your spare cash gambling, the amount in your savings might be much smaller than if you’d just saved the money.
If you don’t have enough cash for a sizeable deposit, the amount of money you are able to borrow will likely be lower. If you’re still able to borrow the amount you need, you could end up paying additional fees such as lenders mortgage insurance if your deposit is below 20%.
Tips for Helping You Get Your Loan Application Approved
- Stop gambling. When determining your living expenses, lenders will generally look at your transactions in the last six months of bank statements. If you can stop gambling, you might reduce your living costs which may increase your chance of getting your loan application approved. In addition to reduced living expenses, a lender may feel more comfortable approving your application if the risk of gambling is reduced or not there at all. Financial institutions will only lend you money if they are confident you will pay it back.
- Start saving. If you’re able to save regularly, it generally shows lenders that you have the ability to make monthly repayments on a loan. It can also boost your deposit amount, which can sometimes increase your borrowing capacity.
- Pay off debt. Lenders will look at how much debt you have compared to the amount of income you earn. If your debt-to-income ratio is high, they might decide that you can’t afford to add any more debt to the equation. By paying off debt, you can reduce your debt-to-income ratio and demonstrate that you can make regular payments. Paying off debt can also positively impact your credit report.
- Improve your credit score. Check your credit report to see how it’s looking. If you notice any errors on your file, it’s important to try and have these fixed. If your report is accurate and your score isn’t great, unfortunately, all you can do is spend some time paying off your debt and ensuring you keep on top of contractual repayments to try and improve your credit score.
Where Can I Get Help?
If you or a loved one are struggling to gamble responsibly, it’s essential to seek help as soon as possible. Gambling Help Online provides resources and assistance to help you get back on track.
If you’re looking for help with managing money to apply for a loan, it could pay to seek financial advice or free financial counselling.
If gambling has affected your ability to borrow money, one of the most important steps is realising this fact. Awareness often leads to action. By focussing on getting your credit score and gambling under control, you’ll likely be ready to apply for your next loan with a bit of time.
Will Gambling Affect My Credit Report?
If you choose to gamble responsibly, there’s every chance that your credit score will likely remain unaffected. As we’ve seen, gambling doesn’t necessarily directly impact your credit report, but it can indirectly affect it if credit products are used to pay for the habit.
We’ve shown how having a few bets can very easily reduce your chances of getting approval for a mortgage or other loan by impacting your borrowing capacity. So, if you’re thinking about making a large purchase in the near future, it might be a good idea to cut back on the betting for a while.
Wanting to Apply for a Loan?
If you’ve experienced bad credit history in the past, contact Finance One and we can assist you to apply for a secured or unsecured personal loan based on your personal financial needs. Get in touch with our team at Finance One support to discuss your options today.Apply Online Now
Disclaimer: The information above is of a general nature only and does not consider your personal objectives, financial situation or particular needs. You should consider seeking independent legal, financial, taxation or other advice to check how the information relates to your particular circumstances. We do not accept responsibility for any loss arising from the use of, or reliance on, the information. Please note that approvals for loan applications are subject to satisfactory documentation being received to properly assess the application. Normal lending criteria apply. Fees and charges are payable. Terms and conditions apply.