This is due to ASIC responsible lending obligations.

For personal use loans, lenders must assess both credit history and repayment capacity, even if the loan is fully collateralised.

Without a credit check, Block Earner cannot know if someone already has multiple loans elsewhere, used those funds to buy more crypto, and is now borrowing again against that same exposure.

Collateral liquidation is the fallback, but regulations require lenders to assess affordability before things go wrong, not after.

Yes, because what is the point of an income/credit check on a collateralised loan? If the loan repayments are not paid, then the collateral is liquidated and the loan cancelled (presumably).