Why did I fail CBA's credit scoring?

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Bradleigh
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Joined: Fri Jun 07, 2019 3:17 pm

Why did I fail CBA's credit scoring?

Postby Bradleigh » Fri Jun 07, 2019 3:23 pm

Hi, I was recently knocked back by CBA for a home loan citing that I failed their credit scoring. I went over my credit file and can’t for the life of me understand why I failed their credit scoring. What does that even mean? Can you enlighten me?

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Otto Dargan
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Re: Why did I fail CBA's credit scoring?

Postby Otto Dargan » Fri Jun 07, 2019 3:55 pm

Hello Bradleigh. Welcome to the forums.

Credit scoring is an automated system and each lender have their own system leading to different outcomes between the different systems. The banks don’t disclose the algorithm they use to credit score your home loan application to stop people from gaming their system. Fortunately, many of our mortgage brokers have worked with the bank’s credit department and are familiar with the system used by banks.

You may have failed CBA’s credit scoring due to a myriad of different factors. We’ve compiled common reasons borrowers fail a bank’s credit score under three categories, namely:
  • Your personal situation: Lenders like to see stable employment and income, genuine savings, location of the property and your asset and liability position relative to your age.
  • Your credit file: A clean credit history with minimal credit enquiries is preferred. Adverse credit listings such as defaults, part 9 agreement and bankruptcy on your credit file are likely to make you fail their credit scoring.
  • Your home loan application: The loan amount, LVR (loan to value ratio), inconsistencies, incomplete application, serviceability and loan purpose stated in your loan application all factor into the bank’s credit scoring.
Our credit score calculator is designed to identify which aspects of your situation will be considered high risk by the lenders. Fortunately, not all lenders use credit scoring.

Give us a call on 1300 889 743 or fill in our free assessment form to find out if you qualify for a home loan.

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

Bradleigh
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Joined: Fri Jun 07, 2019 3:17 pm

Re: Why did I fail CBA's credit scoring?

Postby Bradleigh » Fri Jun 07, 2019 4:32 pm

I’ve never had any defaults or negative listing on my credit file. I applied and was approved for a pre-approval with a couple of lenders about 4 months ago but ultimately decided not to go through with the purchase. I’m thinking this may have had something to do with it. Is that it?

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Otto Dargan
Mortgage Specialist
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Joined: Sat Sep 06, 2008 5:55 pm
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Re: Why did I fail CBA's credit scoring?

Postby Otto Dargan » Fri Jun 07, 2019 6:16 pm

Hi Bradleigh,

Not many people know this but having too many credit enquiries in a short period of time is looked at unfavourably by lenders. As they worry that you were declined by other lenders and wonder what the other lenders know about you that they don’t. Thus they reduce your credit score. You’re likely to fail a bank’s credit score when applying for a mortgage if you have more than two or three credit enquiries in the past 6 months. That may explain why you failed CBA’s credit score.

Credit enquiries will remain on your file for five years from the date that they were lodged. However, we find they do not have a large effect on your credit file after twelve months have passed.

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

Rowley
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Joined: Fri Jun 07, 2019 8:13 pm

Re: Why did I fail CBA's credit scoring?

Postby Rowley » Sat Jun 08, 2019 11:13 pm

Can't a person inquire a few times simply to know what their options are though?

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Otto Dargan
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Re: Why did I fail CBA's credit scoring?

Postby Otto Dargan » Sun Jun 09, 2019 10:38 pm

Hi Rowley,

When it comes to credit enquiries, the major lenders prefer if you only have one or two enquiries in the last six months, any more than this then it is likely for the banks to decline your mortgage. However, there are some lenders who are stricter and will ask for explanations for all the enquiries that you have made in the last two years. In this case, it would depend on the reasons that you provide to the banks to determine whether your loan application will be accepted for finance approval or not.

The good news is that some lenders have low credit score home loans for Australians that have too many enquiries. We know which lenders take a lenient approach to your credit file activity.
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

Bradleigh
Posts: 3
Joined: Fri Jun 07, 2019 3:17 pm

Re: Why did I fail CBA's credit scoring?

Postby Bradleigh » Sun Jun 09, 2019 10:39 pm

Cool. So, can you tell me what information was used to credit score my application?

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Otto Dargan
Mortgage Specialist
Posts: 7726
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
Contact:

Re: Why did I fail CBA's credit scoring?

Postby Otto Dargan » Sun Jun 09, 2019 11:07 pm

Hi Bradleigh,

Typically, lenders use the following when assessing your home loan application:
  • Equifax credit history: Your credit history or credit file is the single most important factor in your credit score. Even if you don’t have any blemishes on your file, too many credit enquiries can also lead you to fail their credit scoring.
  • Your history with the bank: If you have an account with the bank they have all the information of your credit cards, personal loans and home loans. Any single missed repayment in the last 12 months is enough to get your loan declined.
  • Stability: Job and your current address stability are also looked at by banks. People with less than 6 months of history in their current job or current address will have a lower credit score.
  • Asset & liabilities: Your asset needs to compare with your age and income. High-income earners with no assets will have a lower score and borrowers with savings will have a positive impact on their score.
  • Borrowing power: Lenders view borrowers who can easily afford the loan amount as lower risk. So, if you’re borrowing to your limit this can also lower your score.
  • Loan to value ratio (LVR): The lower the LVR, the lower the risk to the bank. If you’re borrowing over 90%, you’ll need to be in a strong financial position to pass the bank’s credit score.
  • Loan purpose: The most common loan purposes ranked from the lowest to the highest risk are purchasing a home, purchasing an investment property, refinancing, business purposes, consolidating debt and undisclosed purposes.
Give us a call on 1300 889 743 or fill in our free assessment form to find out if you qualify for a home loan.

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


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