Preliminary Credit Assessment: Steps and Records

A preliminary credit assessment is the broker’s recorded conclusion that a loan isn’t unsuitable for the client. You make it from verified facts before you suggest the loan or help the client apply.

The lender then makes its own credit assessment and can reach a different answer. Your file has to show why you reached yours from the evidence you held at the time, whatever the lender later decides.

The steps below take one fictional file from first inquiries to a finished record, then show how to diagnose a loan that fails a lender’s policy. The responsible lending guide explains the legal duties behind each step.

Define the Assessment

A preliminary assessment is the broker’s record of whether a specific loan would be unsuitable for a specific client if they took it out during the period the assessment covers. ASIC’s Regulatory Guide 209 (RG 209), issued 9 December 2019, sets out the test.

Under RG 209, a loan is unsuitable if it’s likely the client can’t meet the repayments or can meet them only with substantial hardship. A loan that won’t meet the client’s requirements or objectives fails the test too.

A credit assessment is the wider term for any check of whether a borrower can repay a loan and whether the loan fits their needs. RG 209 says the broker’s version is called a preliminary assessment. The lender’s version is called an assessment or a final assessment.

Who Prepares, Receives and Relies on It

The credit licensee prepares the preliminary assessment before suggesting a loan, suggesting the client stay in their current loan or helping with an application. A credit representative may need to help their authorising licensee meet these obligations. They still owe the best interests duty personally, according to ASIC’s Regulatory Guide 273 (RG 273), issued 24 June 2020.

Your client can ask for a written copy, free of charge. ASIC can ask for it during surveillance. The Australian Financial Complaints Authority (AFCA) or a court can use it in a dispute.

The lender can use the information you collected. RG 209 says it must still form its own view on whether that information is reliable and current.

How It Differs From Lender Approval

	Broker’s preliminary assessment	Lender’s credit assessment
Who makes it	The broker’s credit licensee	The lender
What it decides	Whether the loan is unsuitable for this client	Whether the loan is unsuitable, and whether the lender will accept the credit risk under its own policies
Information used	What the broker gathered and verified	The broker’s information plus the lender’s own checks
What it allows	Suggesting the loan or helping the client apply	Approval with conditions, or a decline

RG 209 says the word “preliminary” doesn’t reduce the broker’s responsibility. It reflects that a broker may not see everything the lender sees and doesn’t carry the lender’s commercial risk.

The two assessments can disagree. A lender can decline a loan you assessed as not unsuitable, and the responsible lending rules don’t restrict its right to refuse. The lender’s pre-approval comes after your assessment, and the home loan pre-approval process explains those stages.

Gather and Verify

Gather the client’s requirements, objectives and financial evidence, then verify each item before you assess any loan. Complete these inquiries and checks within 90 days before the assessment and within 90 days before you provide credit assistance.

RG 209 notes that the longer 120-day period for home loans applies only to credit providers. As a broker, you work to 90 days.

Give the client your credit guide before you start. Your fact find for mortgage brokers collects the client’s answers, and the checks below decide whether you can rely on them.

1. Requirements. Record the loan amount, purpose and term the client wants, and the features they need or want to avoid, such as an offset account or a fixed rate. Note which feature comes first when two conflict.
2. Objectives. Record what the loan has to achieve and by when, such as buying within four months or lowering repayments. Note how the client expects their position to look at the end of the term.
3. Identity. Confirm each borrower’s identity with documents your licensee and the lender accept. Record which documents you checked and how, using the verification of identity guide.
4. Income. Verify each income source with documents that show the amount and how regular it is, such as payslips, an income statement or tax returns. Compare them with the client’s stated figures and note any gap.
5. Expenses. Verify living expenses from bank statements and bills, then compare the result with the client’s declared figure. A benchmark such as the Household Expenditure Measure (HEM) can test whether a figure is plausible, but RG 209 says it doesn’t verify the client’s actual spending.
6. Liabilities. List every debt from the credit report and statements, including credit cards, car loans and buy now pay later accounts. Record each limit, balance and repayment, plus any child support or other legal obligation.
7. Dependants. Record the number and ages of dependants and any special medical needs. RG 209 names these as reasons a household can have higher costs it can’t cut back.
8. Foreseeable changes. Ask what the client expects to change during the loan, such as parental leave, reduced hours, retirement or a payment that stops when a child reaches a certain age. Record the reduced income or higher cost you’ll use in the assessment.

Move on when every check has a source document, or a recorded reason why no document exists.

Document Suitability

Document suitability by linking each verified fact to the lender criteria you tested, the products you compared and the reason for your conclusion. RG 273 says a concise narrative summary can connect these records and show why you recommended the loan.

How Lender Criteria Inform the Reasoning

Credit assessment criteria come from two places. The law sets the unsuitability test, and each lender adds its own rules on borrowers, income, debts, loan purpose and security.

A lender’s criteria show whether it’s likely to accept the client. They don’t settle suitability, because a loan can fit a lender’s policy and still miss the client’s objectives.

Record each policy you relied on with the lender’s name, the policy wording and the date of that policy version. Bulma’s Policy Advisor quotes the lender’s policy wording in each answer, with the date Bulma last updated that policy. You can copy the answer and its source into the file note, recording that date as Bulma’s update date rather than the lender’s publication date.

Explain Inconsistencies

When two sources disagree, record both figures, the question you asked and the document that settled it. RG 209 says you shouldn’t rely on information you have reason to believe is untrue, and an obvious inconsistency is one reason for doubt.

Write the resolution so a reader can follow it without you. Compare these two file notes on the same expense check.

• Incorrect: “Expenses checked and OK.”
• Correct: “Declared $3,200 a month. Three months of statements average $3,900, with the extra $700 in gym, streaming and dining. Clients confirmed no change planned. Assessed at $3,900.”

Fictional File: Hannah and Leo

Hannah and Leo are fictional clients buying their first home. The figures, lenders and products below are hypothetical and show how one file connects each part of the reasoning.

Part of the file	What the broker recorded
Requirements	Owner-occupied purchase up to $750,000 within four months. Loan of $600,000 over 30 years, principal and interest. Variable rate and an offset account.
Objectives	Repayments of no more than $3,800 a month. Extra repayments from savings.
Verified income	Hannah earns $98,000 base as a full-time nurse, from two payslips and her 2025-26 income statement. Leo earns $72,000 as an employed designer, from two payslips and an employment letter.
Foreseeable change	Hannah moves to four days a week from March 2027, so her base income falls to $78,400. The assessment uses $78,400.
Expenses	Declared $3,200 a month, assessed at $3,900 from three months of statements.
Liabilities	A car loan with a $14,000 balance and $420 monthly repayments, found on the credit report and missing from the fact find. Leo confirmed it, and it’s included. A credit card with a $6,000 limit.
Savings	$190,000 verified: $150,000 deposit, $30,000 estimated purchase costs and $10,000 kept for the offset account.
Products considered	Lender A’s basic variable loan, Lender B’s variable loan with an offset account and no annual fee, Lender C’s three-year fixed loan and the aggregator’s white-label variable loan with an offset account.
Exclusions	Lender A has no offset account. Lender C’s fixed loan caps extra repayments.
Conflict	The white-label loan pays the broker a higher trail commission and charges an annual package fee. Lender B’s loan meets the same objectives without the fee, so the broker excluded the white-label loan.
Conclusion	Lender B’s $600,000 variable loan with an offset account isn’t unsuitable. Its serviceability calculator showed a surplus using Hannah’s reduced income, the $3,900 expenses and the car loan repayment. The estimated repayment fits the $3,800 limit.

The best-interests reasoning sits in the conflict and exclusion rows. The offset account and the freedom to make extra repayments answer the clients’ stated objectives. Choosing Lender B’s loan, which has no annual fee, over the higher-paying white-label loan shows the clients’ interests came first.

The reduced income matters more than the current one. Hannah’s $78,400 figure is the income the loan has to survive from March 2027, so it’s the one the file tests. The loan serviceability guide explains how lenders turn income and expenses into a borrowing limit.

File-Note Template

Copy this structure into each client’s file. The example column continues the fictional file.

Field	What to record	Example from the fictional file
Meeting date	The date of each meeting or call that changed the facts or objectives	14 August 2026
Borrower objectives	The requirements and objectives in the client’s priority order	Buy within four months, offset account, repayments no more than $3,800 a month
Verified facts	Each income, expense, debt and savings figure with the document that verifies it	$98,000 base, two payslips and 2025-26 income statement
Policy source and date	The lender, the policy wording relied on and the date of that version	Lender B’s serviceability and offset rules, with the policy date
Considered alternatives	Every product compared, including any aggregator product	Lenders A, B and C and the white-label loan
Exclusions	Each product or product type ruled out and the reason	Lender C capped extra repayments
Recommendation reasons	Why the chosen loan best meets the objectives, and how you handled any conflict	Offset account, no annual fee and a surplus on the reduced income
Unresolved questions	Anything still open, who owns it and when it’s due	Contract of sale not yet signed
Responsible reviewer	The person who checked the file and the date they signed off	Name of the credit licensee’s reviewer and review date

Complete the Record

Complete the record by dating each step, keeping every version and preparing the written assessment so you can give it to the client on request.

1. Date the inquiries. Record when you made the inquiries and verified the evidence. Credit assistance must follow within 90 days, so inquiries made on 14 August 2026 support assistance up to 12 November 2026.
2. State the period the assessment covers. RG 209’s test asks whether the loan would be unsuitable if entered during that period, so name the dates and the loan they apply to.
3. Version the assessment. Save a new dated version whenever the loan amount, product, lender or client’s facts change. Keep the earlier one. RG 273 says notes taken during the process capture your reasoning better than notes written at the end.
4. Prepare the written assessment. RG 209 calls it good practice to prepare a written copy when you make the assessment and give it to the client even without a request. It sets out the client’s requirements and objectives, the financial information you relied on with its amounts and how you verified each item.
5. Add any reliance on others or planned changes. If repayments depend on another person’s support, describe their finances and how you verified them. Where the client plans to cut a cost to afford the loan, such as closing a credit card, state the action they said they’ll take.
6. File the supporting records. RG 273 expects records that include the assessment or the documents used to prepare it, the credit guide given and what you sent the lender. It also expects relevant conversations, the options and recommendation with reasons, and any conflict and how you handled it.

The client can ask for the written assessment for up to seven years. ASIC’s Information Sheet 146 (INFO 146), updated May 2025, says to give it within seven business days if the request comes within two years of the credit quote. A later request must be answered within 21 business days.

You don’t have to give a copy if you never provided credit assistance. RG 209 says the obligation stays if you did assist and the client or lender later decided not to proceed. Keep the record for at least the seven years in which the client can ask for it.

The record is complete when a colleague can read the file note and reach the same conclusion from the same facts and products without asking you a question. Check three things before you file it: inquiries dated within 90 days of the credit assistance, a version that matches the loan applied for and a named reviewer.

Diagnose a Failed Policy Match

When a lender rejects a scenario, trace the rejection to the exact policy rule it failed. Then decide whether the cause is the rule itself, missing evidence, a calculator assumption or an outdated policy version.

1. Find the cited rule. Match the decline reason, system flag or calculator result to one rule in the lender’s current policy. Name whether it’s a borrower, income, liability, loan purpose or security rule.
2. Classify the failure. Use the table below to separate a hard restriction from a problem you can fix.
3. Record the failed condition. Note the lender, the rule’s exact wording, the policy version and its date, the fact that failed it and the date you checked.
4. Decide what would change the result. Corrected facts, written clarification from the lender, a permitted exception or a different lender are the four routes. Each one needs its own record before you reassess.

Cause	What you see	Next action
Hard restriction	The policy says the lender won’t accept the client’s situation	Record the rule and move to a lender whose policy fits
Missing evidence	The rule allows the situation with proof the file doesn’t yet hold	Get the document, then resubmit or rerun
Calculator assumption	A serviceability shortfall that traces to an input, such as an expense figure, loan term or income type	Correct the input to the verified figure and rerun
Outdated policy	Your file cites an older policy version than the lender’s current one	Check the current version and reassess against it

MyState’s broker lending procedure, effective 1 July 2026, separates a hard restriction from missing evidence in its credit report rules. It declines any loan with an outstanding default and doesn’t accept credit reports showing a bankruptcy or Part IX debt agreement.

A default listed as unpaid is different when the client says they’ve paid it. MyState’s procedure calls for further investigation and asks for evidence of payment to keep on file.

Paid defaults are assessed case by case. A recommended application with a paid default or court judgment goes to MyState’s relationship manager for review, with the broker’s explanation and mitigants.

The bad credit history guide covers how other lenders treat defaults. Record the outcome either way. If you move the client to another lender, the failed rule and its date explain why.

Prepare an Exception Request

Send an exception request only where the lender’s policy permits one. MyState’s 1 July 2026 procedure gives two examples.

Lending above its 70% maximum loan-to-value ratio (LVR) for high-value properties needs approval through its relationship manager. An exception to its ban on cocktail loans needs credit approval.

1. Quote the exact rule and the gap. Copy the policy wording and state which fact falls outside it.
2. Quantify the departure. For a $4,500,000 house in Sydney, MyState’s 70% limit allows $3,150,000. A 75% request is $3,375,000, or $225,000 above the limit.
3. Disclose adverse facts. Include anything the credit assessor will find anyway, such as a paid default or a recent job change.
4. Attach compensating evidence. Add documents that reduce the lender’s risk, such as savings held after settlement, a long employment record or a low debt-to-income ratio.
5. Identify the credit decision-maker. Ask who holds the authority to approve the exception, and address the request to that person or team.
6. Record the outcome separately. File the written approval, its conditions and how long it’s valid in their own entry, apart from any business development manager (BDM) comment.

A BDM’s informal view by phone isn’t a credit decision. Record it with its date as an informal view, and treat the exception as approved only when the lender confirms it in writing.

If no route changes the result, record the lender as unsuitable for this client and move to the next lender on your shortlist. That lender needs its own policy check and a new version of the preliminary assessment before you help the client apply.