What is a credit score?
A credit score is a number based on information contained in your credit report. Lenders may use your credit history and score as part of their assessment when deciding whether to approve an application for credit.
In Australia, credit scores can vary depending on the credit reporting agency, so you may not necessarily see the same number everywhere. A higher score generally indicates a lower level of credit risk to a lender.
What information can affect your credit score?
Your credit report contains information about your credit history and how you have managed credit over time. Factors that may influence your score include the amount of money you have borrowed, the number of credit applications you have made and whether repayments have been made on time. This means everyday financial behaviour can become important when you are preparing to apply for a home loan or other finance.
Why does your credit score matter when applying for a home loan?
When assessing a home loan application, lenders consider a range of factors, including your income, expenses, existing debts and credit history. Your credit score is therefore only one part of the overall picture, but a stronger credit profile can potentially provide access to a broader range of lending options.
If there are issues recorded on your credit report, understanding them before submitting an application gives you an opportunity to investigate them and discuss your circumstances with your broker.
Check your credit report before applying
It can be worthwhile reviewing your credit report before applying for a home loan, particularly if you haven’t checked it recently. Australian consumers have the right to obtain a free copy of their credit report every three months, and Iron Advantage recommends checking it at least once a year. When reviewing your report, check that your personal information, credit accounts and repayment history are accurate. If something appears incorrect, you can contact the relevant credit provider or credit reporting body to investigate it.
Avoid making unnecessary credit applications
Applying for several forms of credit within a short period can result in multiple enquiries appearing on your credit report. If you’re preparing to buy a property, it can therefore be useful to understand your borrowing position before submitting multiple loan applications. A mortgage broker can assess your circumstances and compare lending options before determining which lenders may be appropriate for your situation
Preparing for your next move
Your credit score doesn’t tell the whole story, but understanding your credit position can help you prepare for a finance application with greater confidence. At Iron Advantage, we take the time to understand your financial circumstances, borrowing requirements and property goals before exploring lending options across our lender panel.
