What is the major reason for a bad credit score?

[Ajjary]

Hi team,

One of my friends had applied for a home loan a few months ago at this one bank. It was declined because they said he had a low credit score. Can you tell me why do people get a low score in the first place? It’ll help me prepare later when I apply for a mortgage.

FYI, I’m looking to buy a property in the range of $500,000.

[Otto Dargan]

Hello Ajjary. Welcome to the forum.

Your credit score indicates the riskiness of your home loan application to a lender. Your credit score will depend on which lender you apply with as each lender may have their own methods to calculate the credit score.

Most of the time applicants fail their credit score or get a low score because of:

• A bad credit history.
• Frequent changes of jobs and/or living address.
• Lack of genuine savings.
• Late or missed payments.

To get an estimate of your credit score is you can use our Credit Score Calculator. This calculator will also provide you with extra tips on why the lender may decline your loan in case your score is low.

The calculator uses a similar method used by the lenders and lenders mortgage insurers to assess your loan. Please also note that this is just an estimate and should only be used as such.

You can enquire online or give us a call on 1300 889 743 if you want to know more.

Cheers,

[Ajjary]

I tried the calculator and my score came in at low. I believe it’s due to the credit enquiries. I’ve 6 credit enquiries in the last 6 months. Is there any techniques with which I can improve the credit score?

[Otto Dargan]

Hi Ajjary,

In order to improve your credit score you should first identify what is causing your loan to fail the lender’s credit score. You can work towards fixing it once you have identified the causes.

Some of the ways to fix the different causes are as follows:

• Do not overdraw your cheque account.
• Do not go over your credit card’s limit.
• Pay off the credit card debt as much as possible.
• Always pay off all of your debts on time.
• Pay any defaults immediately.

Some of the ways to improve your credit score further are as follows:

• Apply for a $500 (or minimum) credit card from the lender you want to take out a mortgage with and pay it back on time.
• Avoid applying for any loans that you don’t need to avoid more credit enquiries.
• Stay in your current job and address until you apply for your loan.
• Open up a savings account and save regularly, preferably increasing the amount every time.
• Making deposits to a savings account regularly which will show the lenders that you are good with your money.

Once you work on aspects of your situation hindering your credit score, it can improve your credit score. This way you can maximise your chances of getting your home loan approved.

If you would like to know more about these you can check out our website for more details. We can also be reached on 1300 889 743 or you can enquire online to contact us.

Cheers,

[Ajjary]

Thanks, I appreciate you sharing all this info. It looks like all this is going to take a while. I’ll contact with you guys in the coming month. Bye.