With interest rates coming down and lenders working hard to bring new customers on board, the idea of being blacklisted by a bank is not something most people worry about – but it is happening.
Julian Finch, founder and CEO of Finch Financial, said that while the term ‘blacklisted’ was technically incorrect, the consequences of poor financial behaviour were very real and could impact a person’s ability to access credit in the future.
“There is no formal public blacklist maintained by banks but if you’ve defaulted, had a loan declined, or behaved in a way that raises red flags, that information doesn’t just disappear,” he said.
“The information becomes part of your credit profile or sits inside a bank’s internal systems and that can stop you from getting a loan, not just with them, but potentially with other lenders too.”
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The idea of being blacklisted by a bank is not something most people worry about – but it is happening.
Mr Finch said some of the key reasons people could find themselves effectively ‘blacklisted’ included defaulting on loans or credit accounts, meaning a person failed to meet repayment obligations on a personal loan, home loan, credit card or vehicle finance.
This, he said, typically occurred when a payment was more than 60 days overdue and over $150.
“These black marks stay on your record for five years. Even if the debt is eventually paid, the default itself can disqualify you from mainstream lending,” Mr Finch said.
Defaults are viewed as a high-risk indicator and can immediately trigger a loan rejection, especially if the application is made with a major bank.
Overdrawing accounts or dishonoured payments, can also lead to being blacklisted, Mr Finch said.
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Consistently overdrawing your bank account or bouncing direct debits may not seem serious, but it raises red flags about financial management.
“Banks monitor conduct. Frequent dishonours or overdrawn accounts suggest instability and this may influence a bank’s willingness to approve new credit or renew existing facilities,” Finch said.
“Even if your credit score is intact, poor account conduct can quietly sabotage your application from within the bank’s own risk systems.”
Finch Financial chief executive and mortgage expert Julian Finch says people need to stay on top of their finances.
Other things to consider include inconsistent income reporting, undeclared debts, unexplained deposits and mismatched documentation.
Multiple rejected applications in a short time frame could also be cause of concern for banks.
“If a bank sees you’ve applied for five loans in three months, that’s a red flag,” Mr Finch said.
“It makes you look desperate and that alone can be grounds for rejection.”
Bankruptcy or serious credit impairment could also lead to a person being blacklisted as could working in certain jobs.
“If you’re in a highly casualised industry, paid in cash or run a business with fluctuating revenue like hospitality or construction subcontracting, lenders may be cautious,” Mr Finch said.
“Additionally, occupations with perceived reputational or ethical risk such as adult entertainment, crypto trading or gambling-related businesses, may lead banks to decline your application outright, regardless of your income or credit score.
“Banks don’t always give a reason, but behind the scenes, they’re calculating risk based on volatility, regulatory pressure and internal policy and your job can absolutely influence that.”
How to recover from lender rejections
Mr Finch advises anyone concerned about their lending history or profile to seek help before applying for new credit.
“Work with a finance expert who understands how banks think,” he said.
“We can match you with lenders who are suited to your circumstances, present your case the right way and help you avoid unnecessary hits to your credit file.”
English (US) · 