Your credit score is an important part of successfully securing a home loan. It impacts your chance of approval, and also the interest rate, deposit and features that a lender is willing to give you. And if you don’t meet the minimum criteria, you simply won’t get a loan. But many Australians aren’t aware of what their own credit score is, let alone the minimum credit score for a home loan in Australia.

What is a credit score?

Your credit score is sometimes also called a credit rating. It’s based on the personal and financial information that’s kept in your credit report. Your credit report is the record of your credit history. It includes the loans you hold, loans you’ve applied for (whether successful or not) and your repayment history. It also includes (if applicable) financial hardship information, any defaults on credit, bankruptcies and even credit report requests. All of your credit information is fed back by lenders and banks to credit reporting agencies, such as Experian or Equifax. They consolidate that information and make it available to you if and when you need it.

Why is your credit score important?

Your credit score is important because lenders use it to decide whether to give you credit or lend you money. And the better your score, the better position you’re in to negotiate a great interest rate, get a loan with the features you want or even refinance with a more competitive loan. On the other hand, if you have a bad credit score, you may find your loan application rejected outright or your interest rates too high to be affordable.

What is the minimum credit score for a home loan in Australia?

So, once you’ve checked your credit report, how do you know whether or not your score is any good? And how do you know if you’ve met the minimum credit score for a home loan in Australia? Each credit agency or reporting body will give you a slightly different credit score. And of course the higher the better. But 1,000 or 1,200 is generally the highest score you can receive. It’s pretty rare to score the coveted 100%. But if your score is around 850 that’s still considered excellent. Even 600 is pretty good, and 500 will likely still see you receiving a loan offer.

Credit Score Range

Excellent

850-1200 Easy approval with lots of options.

Very good

700-850 Most lenders are happy to offer you a home loan.

Good

600-700 You will likely be approved for a home loan.

Average

500-600 Lenders will look at all the factors including income before offering you a loan.

Below average

Below 500 Interest rates will be high with any home loan.

Obtaining your credit report

To find out your credit score, you will need to access your credit report. Usually you can do this within a day or two simply by contacting the various credit agencies.

• Experian
• Equifax
• illion

Different agencies can give you different results. So you may have to get more than one credit report to get a full understanding of your credit position.

What if you have a below average credit score?

If your credit report comes back with a below average credit score – or if you’re simply not happy with your credit score as is – there are some things you can do to improve it.

1. Start focusing on your credit health early and stay ahead. If you’re planning on buying a house in the near future, start working on your credit health now.
2. Keep on top of your bills and pay off loans. If you can’t pay them off, make extra payments.
3. Set up automatic account transfers towards both bill payments and your savings.
4. Decrease your credit card limit or cut up your card altogether.
5. Do all you can to increase your savings and your income.
6. Stick with your healthy repayments and savings long term so that when you check your credit score next, you’ll have no fears.

Understanding your credit score is your ticket to a successful home loan

Understanding your credit score is your ticket to ultimately obtaining a favourable home loan. Especially once you know the minimum credit score for a home loan in Australia. Not only will you understand where you stand and your negotiating power, but you might even be able to improve your chance of approval. And, at the end of the day, a good home loan is what we’re looking for! Need help understanding whether you meet the minimum credit score for a home loan in Australia? Get in touch with our expert team who can help!