The red flags that will cause a home loan decline

We’ve compiled a list of the common reasons why people fail a bank’s credit score.

We’ve broken it into three sections: your situation, your credit file and your application.

The good news is that not every lender credit scores. If you need help applying for a mortgage then please call us on 1300 889 743 or enquire online to speak to one of our mortgage brokers and see which lenders you will qualify with.


Your personal situation

  • Employment: Generally you must not be on probation and must have been in your job for at least 6 – 12 months.
  • Genuine savings: You must have 5% of the purchase price saved in a bank account if you are borrowing over 80% of the value of a property.
  • Location: The location of the property you are using as security must be acceptable to the bank. Western Sydney is often given a low score.
  • Stability: If you move jobs or house frequently then the banks see you as unstable. This will reduce your credit score.
  • Assets & liabilities: Your assets must make sense for someone of your age and income. If your assets are low or your debts are significant then your credit score will be low.
  • More liabilities than assets: Most lenders will auto decline your loan as you are technically insolvent.
  • Amount of unsecured debt: If you have a significant numbers of credit cards or personal loans, and if you owe close to your limit on those cards, then your loan may be declined.
  • Industry: If you are employed in a fluctuating industry such as mining or construction, or are employed on a casual or contract basis then the lender’s credit score will be lower.

Your credit file

  • Credit history: Your credit history is the largest single factor that can impact your credit score.
  • Too many enquiries: Applying for several mortgages, credit cards or personal loans in the 12 months before applying for a mortgage is likely cause you to fail the bank’s credit score.
  • No credit history: If you have never had any loans before then your credit file will be blank. This can be a high risk to the lender as you have not yet proven yourself.
  • Bad credit history: If you have blemishes such as a default, court judgement, court writ, part IX or bankruptcy listing then your credit score will almost certainly fail.
  • Internal credit history: Each bank has their own records of your accounts with them. If you have overdrawn your account or missed payments on a debt then this will reduce your score.
  • Applied with current bank first: If you have already applied with your current bank and then you apply with another bank then you are likely to fail the second bank’s credit score. The second lender is concerned that there is something that they do not know.

Your application

  • Not meeting normal bank policy: Banks have certain benchmarks in place, which if they are not met, will result in an immediate decline.
  • Loan amount: Larger loan sizes are known to be a higher risk and so you need to be in a strong position to qualify.
  • LVR: If you apply for a mortgage for 95% or 90% of the property value then your loan is a high risk.
  • Inconsistencies: If your address history and employment history do not match what is listed on your credit file then the bank may lower your credit score.
  • Incomplete application: If your application is incomplete then some lenders such as CBA will give you a lower credit score. Please try to include your drivers licence number, all of your assets and all of your liabilities otherwise you may be declined.
  • Serviceability: The more excess income that you have, the higher your score. Refer to our ‘How much can I borrow?’ calculator for more info.
  • Loan purpose: Some loan purposes such as refinancing, debt consolidation and equity releases are a high risk and so are credit-scored less favourably.

Have you used our credit score calculator? It can identify the specific reasons that your application didn’t pass.


Do you need help with your home loan?

Our mortgage brokers know how the banks work, and can help you to apply with a lender that doesn’t credit score or who can accept your situation.

Please call us on 1300 889 743 or enquire online and one of our mortgage brokers will give you a call to discuss your options.

  • Kevin Owens

    How many is too many credit enquiries?

  • Hey Kevin,

    Major lenders prefer only one or two enquiries in the last six months. If you have more then it’s likely that your application may be declined. However, there are some lenders who are stricter and will ask for explanations for all enquiries made in the last 12 months or even two years. You can learn more here:
    https://www.homeloanexperts.com.au/credit-score-home-loan/credit-enquiries/

  • goll

    What do you mean by asset position? I think I failed because of that…

  • Hi goll,

    Asset position simply means the amount of assets you own vs. the amount of debts you owe. Your assets must make sense for someone of your age and income so if your assets are low or your debts are significant then your credit score will be low.

  • dame

    I only have $2,000 left on a $20,000 personal loan and a credit card limit of $50,000 although I only use a maximum of $10,000 mostly. I live rent-free and have no other commitments so why is it that lenders are reducing my borrowing power by a lot?

  • Hi dame,

    The personal loan is okay but the issue here seems to be the high credit card limit. Even if you almost never reach your credit limit, most banks will generally assess your limit at 2-3% per month. So for a $50,000 credit limit, the bank may consider your minimum monthly repayment to be $1,500 thereby reducing your overall borrowing power. You can simply reduce your limit to $10k to improve your borrowing power.

    Also note that most lenders will be okay with you living rent-free but some may include a certain amount in rental expense such as $150 a week in case you have to move out.

  • Sim

    Can you help me? I have a couple credit issues that aren’t letting me get a loan.

  • Hello Sim,
    If there is just one or two issues then normally at least one or two of our lenders can potentially help you. However, when the issues are combined there are often no options. Please call 1300 889 743 to discuss this with an expert mortgage broker directly.

  • Davenport

    So is there no way to get a home loan if I’ve just recently started a new career?

  • Hey Davenport,

    Congratulations on starting your new career. There are many people that decide to buy their first home or investment property when they have found a stable job with an excellent income. Unfortunately, many banks won’t lend to people who’ve only been employed for a short period of time. Hwever, one of our lenders can allow you to borrow up to 95% even if you’ve just started a new job. Please check out the new job home loan page for details:
    https://www.homeloanexperts.com.au/unusual-employment-loans/new-job-home-loan/

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