Why do people get low credit score?

Any general questions you might have in regards to loans and finance.
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everlong
Posts: 37
Joined: Thu Jun 20, 2013 6:45 pm

Why do people get low credit score?

Post by everlong »

Hi there, I am planning to buy a house in a few months but before I go ahead and apply for a home loan, I want to be sure about a couple of things. Basically, my friends were telling me that banks tend to decline a loan application if they think the applicant has a low credit score.

Can you tell me why do people get low credit score?

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Otto Dargan
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Re: Why do people get low credit score?

Post by Otto Dargan »

Hi and welcome to the forums everlong,

The credit score you receive may depend on which lender you apply for a loan with. Generally, each lender may have their own methods to calculate the applicant’s credit score. Most of the time, lenders use the data on your credit file in their credit assessment to form a major part of your credit score.

Some of the most common causes of an applicant failing their credit score or getting a low score are as follows:
  • Bad credit history.
  • Late or missed payments.
  • Lack of genuine savings.
  • Frequent changes in jobs and living address.
You can also use the Credit Score Calculator to predict if your score will be high or low. This calculator uses a similar method used by the lenders and lenders mortgage insurers to assess your loan. If the result shows a low credit score then this calculator will also provide you extra tips on why the lender may decline your loan.

However, this calculator should only be used as a guide as the exact score may differ according to the individual lenders.

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

everlong
Posts: 37
Joined: Thu Jun 20, 2013 6:45 pm

Re: Why do people get low credit score?

Post by everlong »

Well, I tried out the calculator and it showed that I have a low credit score. What can I do to improve my credit score?

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Otto Dargan
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Re: Why do people get low credit score?

Post by Otto Dargan »

Hi everlong,

There are certain steps you can take if you want to improve your credit score. These steps are as follows:
  • Apply for a $500 credit card from the particular lender you want to take out a mortgage with.
  • Avoid applying for any loans that you don’t need to minimise credit enquiries.
  • Stay in your current job and living address until you apply for your loan.
  • Open up a savings account and save regularly by depositing a higher every time.
  • Make regular deposits to a savings account to show the lenders that you are good with your money.
If you would like to know more about these then you can check out our website. We can also be reached on 1300 889 743 or you can fill in our free assessment form to see if you qualify for a loan or not.

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

everlong
Posts: 37
Joined: Thu Jun 20, 2013 6:45 pm

Re: Why do people get low credit score?

Post by everlong »

I’ll get straight into this. I will call you when I am ready to get a home loan and buy a house. Thanks for your help. Bye!

G-Rob
Posts: 34
Joined: Fri Jul 19, 2013 2:42 am

Re: Why do people get low credit score?

Post by G-Rob »

Hi there, I too tried out the calculator and like everlong, I too received a low credit score. But I don’t think I can wait for so long to apply for a home loan and follow all the steps you have mentioned above. Do you know any banks that will offer home loans even if I have a low credit score?

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Otto Dargan
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Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
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Re: Why do people get low credit score?

Post by Otto Dargan »

Hi G-Rob,

Yes there are a few lenders who use guidelines and common sense instead of a credit score to approve your home loan. Such lenders may offer home loans to those with low credit scores.

To qualify for such loan, you will need to meet the following requirements:
  • Have a low credit score.
  • Have no credit history or have not borrowed before.
  • Need to borrow up to 95% LVR.
  • Have a bad history with the current bank.
  • Have too many credit enquiries.
  • Have moved house recently.
  • Have recently changed jobs.
  • Want to buy a type of property that your current bank does not accept.
  • Want to buy a property in a location that your current bank do not accept.
Keep in mind that this type of loan may not be suitable for you in the following cases:
  • You have no savings.
  • You have serious credit problems such as a default or judgement and you need to borrow over 90% of the value of the property.
  • You can’t afford to repay the loan.
Please also note if your credit score is very low and your credit history poses a serious question then you may have to borrow at a higher rate. Otherwise the rate difference will usually not be too much and is likely to be similar to the standard variable rate.

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

G-Rob
Posts: 34
Joined: Fri Jul 19, 2013 2:42 am

Re: Why do people get low credit score?

Post by G-Rob »

Okay, noted! Thanks for offering a solution to my problem. I will give you a call to talk about my situation with you in detail. So, expect a call from me tomorrow afternoon. Ciao!

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