When you apply for any type of credit, whether it’s a mobile phone contract, credit card, personal loan or home loan, your application will be given a “credit score.”

This score is the credit provider’s automated assessment of how risky your application is to them.

Because it’s computer-generated, it has caused many people to be declined for a home loan so is there any way to improve your chances of approval.

What are the possible results?

There are three possible results that the lender’s system can give when your application has been scored:

  • Pass: If you pass the credit score, assuming you meet all other aspects of the bank’s policy, then your home loan will be approved.
  • Fail / Declined: If you have failed the credit score then your mortgage application will be declined immediately. More often than not, bank staff are unable to override the system’s decision.
  • Refer: If the system cannot accurately score your application, there are errors with the data or it is on the borderline between pass and fail, then your application may be referred to a credit manager for a full assessment.

Have you had trouble with a low credit score? Please call us on 1300 889 743 or enquire online and one of our mortgage brokers will let you know which lenders can help.

You can also learn how to improve your credit score.

What is my credit score?

You can never know what your credit score with a particular bank is. All you will know is the pass or fail result.

However, you can use our credit score calculator to work out if your score is likely to be high or low.

It can even let you know which aspects of your situation are likely to be a problem for the banks.

Every lender is different

The Australian system gives borrowers an opportunity that is not available to people in the USA or UK who have a low credit score.

Each lender has their own method of calculating your credit score and their own guidelines, therefore it’s possible to get approved with some lenders even if you had a low score with your bank.

In fact, some mortgage lenders do not use credit scoring in their assessment.

Credit score, not credit history

There is a common misconception that your credit score and your credit history are the same thing. This is somewhat true overseas, however, is not true in Australia.

In Australia, your credit history is stored with credit reporting agency Equifax (previously Veda Advantage) and, in addition to this, each bank has an internal credit history for you based on the conduct of any accounts you have held with them.

Your Equifax credit file is available to all credit providers and lenders. They request a copy of your file whenever you apply for a loan.

Your credit file will show which other companies have accessed your file (which loans you have applied for) as well as any defaults, court judgments or bankruptcy issues that may be present.

Banks will use your Equifax file along with their own internal records and the details of your application to then create your credit score.

In other words, your credit file is just one of the aspects of your situation that is taken into account to create your credit score. You can read our page on how your credit score is calculated for more information.

Actually, you have two scores…

Firstly, you have your credit score with Equifax.

This is known as your Equifax Score (previously VedaScore) and it is based on the information in your credit file.

Secondly, you have a credit score with the credit provider you have applied with. This is their own score based on your credit file and all of the information in your application.

The Australian system is unique!

In the United States, there are country-wide credit reporting agencies which generate a score based on your credit history.

The most commonly used system is known as the FICO score (similar to our Equifax Score). A FICO score is between 300 and 850, the higher the score the better.

A low credit score in the US will almost certainly result in you being unable to borrow money, or to be only able to access money through expensive specialist lenders.

The FICO score is calculated based on the following:

  • The repayment history of your existing debts.
  • How much of your credit card / overdraft limits that you have used.
  • Length of credit history.
  • The types of credit you have.
  • The number of times you have applied for a loan recently.

The critical difference between the USA system and the Australian system is that in the US you have the same score with every lender, whereas in Australia each lender generates their own credit score!

Have you failed a bank’s credit score?

Our staff are professional mortgage brokers who have an in depth understanding of how the banks credit scoring systems work.

If you have applied for a home loan and have been declined because of your credit score, then please enquire online or give us a call on 1300 889 743 and we’ll help you to get approved with another lender.

  • O. Wells

    Hi, can we get a home loan without going through a credit check?

  • Hi O. Wells,

    Since all lenders do a credit check on every home loan application, you can’t avoid going through a credit check. However, if you’re worried about failing a lender’s assessment or getting the deal you want because of your credit status, there are other options available. You can learn about all this here:

  • Langham

    I want to get a mortgage to buy my first home so will it be a better idea to apply with a few banks and go with the one that okays my credit score?

  • Hey Langham,

    Applying for several loans or credit cards in a short period of time will have a significant negative effect on your credit score. This means you’ll just become more likely to fail a lender’s credit score now. It’s best to work out which banks you can qualify with and then make just one application. If that’s declined then talk to one of our mortgage brokers by calling 1300 889 743 or enquiring online:

  • bayviewgal

    Hello, I am credit invisible and I understand that this is not a good thing when it comes to applying for a home loan. What can I do to raise my credit score before I apply?

  • Hi bayviewgal,

    Credit invisible just means that you don’t have a credit history so you can start by applying for a $500 credit card for the lender you want to apply with and pay it on time. Avoid applying for loans that you don’t need to minimise credit enquiries and damage your credit file. Also, stay in your current address and job for as long as possible while saving as much as you can in a savings account. This should help improve your credit score.

  • burns

    Is there any way that I can check out an estimation of my credit score?

  • For that, you can try the credit score calculator, which uses a similar method to that used by the banks and lenders mortgage insurers to assess loans. It can serve as an excellent guide to help you understand how banks will credit score. The instructions and additional info are on the page itself:

  • kathy

    I’m an Australian contractor working in Vietnam right now. I’m self employed and I’m paid in USD into an Australian bank account. Can you help me get a 50-60% LVR home loan for $500k?

  • Hi Kathy, we have a few lenders in mind that may be able to lend. One of these lenders may want the loan too be in a company name though. Please call us on our overseas number +61 2 9194 1700 and discuss the details with one of our Aussie expat and contractor specialists.

  • Lamela

    We’re planning to apply for a home loan. Since we were not confident about my partner’s credit score, we paid Equifax and got a report from them. His score is 540, which is way more than we’d expected :) Can we use this report while applying with the bank?

  • Hi Lamela,
    That’s great news! However, it’s important to bear in mind that this is specifically the Equifax score (previously Veda Advantage). Yes, the bank request a copy of your credit file from Equifax when assessing your home loan application but there’s more. Believe it or not, many lenders also use their own credit score on top of this and it varies from bank to bank. The score is based on your credit file and all of the information in your application. Luckily, not all lenders use their own credit score! Please enquire online https://www.homeloanexperts.com.au/free-quote/ or give us a call on 1300 889 743 and we’ll help you to get approved.

  • Kim

    Hi there,
    Due to a small unpaid amount that I didn’t notice, my credit score is at an all time low. How long does it usually take for a score to increase from 400 to let’s say 700?

  • Hi Kim,
    With excellent conduct and no enquiries, your credit score can increase faster. However, it usually can take up to a year. You can find more information on ‘how to improve your credit score’ here: https://www.homeloanexperts.com.au/credit-score-home-loan/improve-my-credit-score/