How Your Credit Score Affects Your Home Loan Application

What Is a Credit Score?

Your credit score is a number between 0 and 1,200 (on the Equifax scale) that represents your creditworthiness. It's based on your credit history — how you've managed credit cards, personal loans, phone plans, and other financial commitments.

Lenders use this score, along with other factors, to decide whether to approve your home loan and what interest rate to offer.

Credit Score Ranges

• 0-459 (Below Average): Significant credit issues. Limited lending options.
• 460-660 (Average): Some lenders will consider you, but with higher rates.
• 661-734 (Good): Access to most standard home loan products.
• 735-852 (Very Good): Competitive rates and good product choice.
• 853-1200 (Excellent): Best rates and maximum borrowing power.

How Lenders Use Your Credit Score

Your credit score is one part of the puzzle. Lenders also consider:

• Your income and employment stability
• Your existing debts and financial commitments
• Your deposit size and savings history
• The property you're buying

A great credit score can't overcome insufficient income, but a poor score can sink an otherwise strong application.

What Hurts Your Credit Score?

The most common things that damage your credit score:

• Late payments: Even one payment more than 14 days late can appear on your report
• Defaults: Unpaid debts over $150 that are more than 60 days overdue
• Multiple credit applications: Each application creates a "hard enquiry" on your file
• Court judgments: Any CCJs or writs remain on your file for 5 years
• Bankruptcy: Remains on your credit file for 5-7 years

How to Check Your Credit Score

You can check your credit score for free through:

• Equifax (formerly Veda)
• Experian
• illion (formerly Dun & Bradstreet)

Checking your own score doesn't affect it — only applications by lenders create hard enquiries.

Tips to Improve Your Credit Score

1. Pay all bills on time: Set up direct debits so you never miss a payment
2. Reduce credit card limits: Even unused credit limits affect your borrowing capacity
3. Avoid multiple applications: Don't apply for credit from several lenders at once
4. Check for errors: Mistakes on credit reports are more common than you'd think
5. Close unused accounts: Old credit cards and store cards you don't use should be closed
6. Wait if needed: Defaults and late payments lose their impact over time

Can You Get a Home Loan With Bad Credit?

Yes, but your options are more limited. Specialist lenders (also called non-conforming lenders) offer home loans for borrowers with credit issues, though at higher interest rates. A larger deposit (20%+) will improve your chances significantly.

Get a Free Credit Health Check

Before you apply for a home loan, let Jain Home Loans review your credit situation. We can advise you on whether to apply now or take steps to improve your position first. Call Nipun on 0469 618 750.