How much does credit score really matter?

Any general questions you might have in regards to loans and finance.
Parker
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Joined: Fri Sep 06, 2019 5:59 pm

How much does credit score really matter?

Postby Parker » Fri Sep 06, 2019 6:02 pm

Hi there, Parker here.
I had defaulted on a few credit cards 2 years ago, but I have paid off all my defaults already. I have a very low credit score. How much does credit score really matter when getting a home loan?

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Otto Dargan
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Re: How much does credit score really matter?

Postby Otto Dargan » Fri Sep 06, 2019 6:43 pm

Hello Parker. Welcome to the forums.

After 1 July 2018, comprehensive credit reporting (CCR) was mandatory. which means lenders will thoroughly scrutinize your credit history. Information related to 24 months repayment history, account limits, type of credit products you have held in the last two years, etc are all listed.

In most cases, a credit score of below 550 is considered bad. This indicates to the lenders that the borrower is not financially stable and that you are a risk.

However, your credit score is just a small part of the bigger picture. If you can show that you have paid off your defaults and in a better financial position now, lenders might be able to help you with bad credit home loans.

You can also work on the following tips to increase your credit score by ensuring:
  • You're not being charged for cancelled services.
  • You have not accrued a black mark due to mistaken identity.
  • Your credit file shows your current address
  • Pay your bills on time and in full
  • You don't make more credit enquiries in a short period of time.
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, even with a low credit score.

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

Parker
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Joined: Fri Sep 06, 2019 5:59 pm

Re: How much does credit score really matter?

Postby Parker » Fri Sep 06, 2019 6:54 pm

Thanks for the help. It’s wonderful to know that banks look into more than just my credit score. But, how do I even qualify for a bad credit home loan?

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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: How much does credit score really matter?

Postby Otto Dargan » Fri Sep 06, 2019 7:14 pm

Hi Parker,

With defaults, how much you can borrow depends on the severity of the default, amount, when it was listed/paid out etc. To qualify for a bad credit home loan with:
  • Small paid default: If you have a small default for less than $500 and it has been paid more than six months ago, we can help you borrow up to 90% or up to 95% LVR (of the property value) in strong cases.
  • More than one small paid default: If you have less than $1,000 in paid defaults from financial institutions (e.g. banks), and less than $500 in paid defaults from non-financial institutions (e.g. phone companies), then you can borrow up to 85% or possibly 90% of the property value.
  • Moderate paid defaults: If you have up to $3,000 in paid defaults, we’re able to help you borrow up to 80% of the property value with a prime lender, up to 90% of the property value with a specialist lender.
  • Large paid defaults: Larger paid defaults from $3,000 to $500,000 can be considered on a case by case basis if you have a very good explanation backed by strong evidence. We can lend up to 90% of the property value with a specialist lender.
  • Unpaid defaults: If you have any unpaid defaults then you can only borrow up to 90% of the property value with a non-conforming lender. Many lenders require you to pay the defaults before the loan is approved.
Please note that a bad credit home loan is a short term fix and lenders are likely to refinance to a prime lender within 2 to 3 years if your credit history is clear.

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

Parker
Posts: 3
Joined: Fri Sep 06, 2019 5:59 pm

Re: How much does credit score really matter?

Postby Parker » Fri Sep 06, 2019 7:40 pm

Great to know that refinancing is an option even for bad credit. How do I refinance out of my bad credit home loan?

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Otto Dargan
Mortgage Specialist
Posts: 7692
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
Contact:

Re: How much does credit score really matter?

Postby Otto Dargan » Fri Sep 06, 2019 7:57 pm

Hi Parker,

You can refinance once your credit file is clear of any adverse listings.

There are certain additional criteria you have to meet in order to refinance out of a bad credit home loan:
  • You must owe 80% or less of your property’s value (90% is considered on a case by case basis).
  • All defaults must be paid and must no longer appear on your credit file. Keep in mind that a mortgage default can remain on your credit file for up to 5 years.
  • You must provide full income evidence (low doc loans may be available in some cases).
  • You must show that you’ve been making your debt repayments on time for the last 6 months.
Give us a call on 1300 889 743 or fill in our free assessment form we’ll help you refinance out of a bad credit home loan.

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


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