Did you know that not every lender in Australia uses a credit score to assess home loan applications?
It is possible to get a fair decision from a lender using common sense, as long as you meet their guidelines.
Do all of the major banks credit score?
All of the major Australian banks use credit scoring to some extent.
Some lenders, such as ANZ and Westpac, rely heavily on credit scoring to make the decisions on their home loan applications.
Whereas CBA, St George and NAB tend to use a combination of scoring and manual credit assessment. They retain some ability to override a decision made by their system, however, they are still reluctant to use it.
As mortgage brokers, we are in a unique position. We know the systems used by the banks and have learnt a great deal about the way that their credit scoring algorithms work.
If you would like our help with your mortgage then please call us on 1300 889 743 or enquire online.
Do they all score applications the same way?
There are significant differences in the way that the major banks credit score.
Some lenders will almost always decline loans from someone with excessive enquiries on their credit file. Other lenders are more focused on someone’s assets and liabilities.
Which banks don’t credit score?
Some of the smaller lenders do not use credit scoring at all! A real person with some common sense can assess your application.
Our mortgage brokers are experts in credit scoring, please call us on 1300 889 743 or enquire online to find out how we can help.
Do the LMI providers credit score?
All of the major Lenders Mortgage Insurers use credit scoring, in fact they are much stricter than the banks.
Genworth Financial, QBE LMI, Westpac LMI, ANZ LMI and St. George Insurance all use credit scoring.
It is almost unheard of for a Lenders Mortgage Insurer to override a credit scoring decision. If you are declined there is nothing you can do except for applying with another lender or reducing your loan so that Lenders Mortgage Insurance is no longer required.
QBE LMI for example, has two scorecard systems that are used for each and every LMI proposal sent to them by the banks and you must pass both systems!
One looks at your Equifax (previously Veda Advantage) credit file and the other assesses your entire application including the loan purpose, loan amount, serviceability, security property and other aspects of your situation that are not related to your credit history.
Don’t worry, some of our lenders have a Delegated Underwriting Authority (DUA) which allows them to approve loans that the mortgage insurers wouldn’t normally look at.
What do their scores look like?
Each bank has their own system of credit scoring, and as a result their scores all have a different format with different meanings.
With some lenders a higher score is better, and with others a lower score is preferable.
CBA for example assigns home loans with a score from 1 to 5, the lower the better. Applications given a score of 1 or 2 are fast tracked for a quick approval, whereas applications scored as a 3 are referred for a manual decision. Applications that are scored as a 4 or 5 are almost always declined.
Citibank uses a scoring method that is more similar to the USA’s FICO score. This is because it relies primarily on the credit history of the applicants, with less weight given to the other aspects of their situation such as their employment, asset position and loan purpose.
Citibank’s score is in the format of a letter ranging from A to D. A, B and C applications are approved based on their merits. D applications are referred to Citibank’s mortgage insurer for assessment. It is rare that D applications are approved if the LVR is over 80%.
Have you been declined?
If your bank has declined your home loan because of your credit score, then the worst thing you can do is apply with several more lenders and end up with a decline from them as well!
Each application will lodge an enquiry on your credit file, further reducing your credit score for future applications.
Instead, if you enquire online or give us a call on 1300 889 743, then one of our mortgage brokers can fully assess your situation. We can help you to identify why you failed their credit score, and help you to apply with the right lender this time.
Remember that there are many lenders that do not credit score and still have competitive interest rates, you just need to know which ones they are!