What is a credit score?
A credit score is an automated assessment of how risky you are to a creditor.
For us, this means how risky your home loan application is to a potential lender.
Your credit score is calculated entirely by computers using information from your loan application and credit file without any human input.
Learn the basics
If you’ve been declined by a bank due to your credit score then do not apply for another loan! Being knocked back again can reduce your score even further.
We’ve created a simple set of guides that you can use to learn about how the banks score applications, and get approved.
What is shown on my credit file?
A credit file is a record of your credit history collected by credit reference agencies such as Veda Advantage (which will likely be rebranded as Equifax in March 2017). This information includes details such as a history of all the loan applications you have applied for, defaults on loans, bankruptcy, and other adverse events.
As of 2014 your credit file also includes positive credit reporting data such as a record of your on time repayments on your current debts. This gives lenders a more accurate picture of your current situation.
Your credit file may have a credit score on it, however the lender will also generate their own credit score from the data in your credit file. You can find out your credit score using our free credit score calculator.
Why did I fail credit score?
Whilst you may be declined for a loan for a number of reasons, the most common reason is due to not reaching the lender’s minimum score for approval. Unfortunately lenders calculate your credit score using their own methods, which they do not publish.
However the most common causes for a failed credit score include:
- Bad credit history.
- Lack of genuine savings.
- Instability of address or employment.
- Missed or late payments.
How can I improve my credit rating?
In most cases there are two or three aspects of your application which are causing you to have a low score. By rectifying these problems you can improve your score and apply for a mortgage again.
If you have problems with your credit file then you can talk to credit repair experts who can help you remove defaults that were incorrectly or unjustly lodged on your file.
Some tips for improving your credit score are:
- Do not overdraw your credit card.
- Make all of your repayments on time.
- Pay any defaults listed on your credit file.
- Stay in your current job and living address until you apply for your loan.
- Show that you are good with your money by making regular deposits to a savings account.
In some cases it may be easier to approach a lender who does not use credit scoring to get a loan.
Which lenders use credit scoring?
While the majority of Australian lenders use credit scoring, there are still some that do not. Even if you have a bad credit history, we know which of these lenders would be most likely to approve your loan application.
In other cases it is a matter of applying with a lender that will score your situation more favourably. For example some lenders are more concerned about your stability so will not accept people in a new job, whereas others will accept someone in a new job but not somebody with defaults.
Apply for a home loan
Our expert mortgage brokers know how banks think and can help you improve your credit score! We also know lenders who don’t use credit scoring!
To use our expert service, please enquire online or call us on 1300 889 743.