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How important is my credit history when I want to apply for a home loan?

A good credit score can make all the difference in getting your home loan approved. Here's everything you need to know.


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To get approved for a mortgage your lender will look at your credit history, so a good credit rating can make a big difference to your loan application. If you're worried about your credit score, check it before submitting a mortgage application. You can check your credit score through finder for free at the link below (and because it's a soft inquiry it won't leave a mark on your credit history).

Check your credit report and score for free today

How will my credit rating affect my home loan application?

Your credit rating gives your lender the information they need to know what kind of borrower you’ll be. If you have a good credit rating you could have access to more home loan options and your home loan interest rates could be lower, saving you hundreds a month on your repayments.

If you have an average credit rating, you could pay higher interest rates and have less home loan options to choose from and if you have a bad rating you may not be able to get approval for a loan at all.

Your credit rating isn’t the only factor a lender will take into account when approving or denying your home loan application, so don’t panic just yet if you’ve got a less-than-ideal record.

Compare bad credit home loan options

How can I improve my credit rating?

A good place to start is by looking at your credit report and then make sure all the information within it is correct.

It’s a good idea to do this regularly and before making any financial decisions, so that if you apply for a loan there are no nasty surprises. If you don’t check before you apply for a loan and then get denied, you’ll also have this recorded in your credit history, so it pays to be careful.

5 ways to improve your credit rating

Another interesting point to consider is whether or not to apply for any new credit products before you approach your lender to ask for a loan. If have no previous credit products on your credit report, taking out a credit card can be a good way to show your lender that you are able to service a debt.

But be careful, it can be easy to get into debt so make sure to pay your balance off in full each month and only apply for a credit card with a low limit. Defaulting on a payment will put you back months in the eyes of the bank. Taking out credit soon before you apply for a loan can also send a negative signal to your lender.

What do I do if my application is rejected?

Your application might be rejected for several reasons, and not always because of our credit history. These include:

  • A bad credit history
  • A savings history which is not genuine (for example savings which were a gift)
  • Employment which hasn’t been continuous or consistent
  • An income which won’t be able to service repayments

If your application is rejected you need to work out why. Start by checking your credit score and seeing if there are any obvious way to improve your credit. You should also make sure you're applying for a mortgage you're actually eligible for. If you've saved a 10% deposit then you shouldn't be applying for a loan that requires a 20% deposit.

Understanding why your application was rejected

But if bad credit is the reason your application was reject all may not be lost. There are a number of lenders in the market who offer non-conforming loans and bad credit products, such as Pepper Home Loans. These specialist lenders may be able to help you.

Compare mortgage options for bad credit borrowers

Data indicated here is updated regularly
Loan purpose
Offset account
Loan type
Repayment type
Your filter criteria do not match any product
Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
Pepper Money Easy Near Prime Full Doc Home Loan - LVR >55% to 65%
$15 monthly ($180 p.a.)
Available for former bad credit borrowers who have had a clean credit file for the last 24 months. Available for purchase or refinance.
Pepper Money Advantage Specialist Full Doc Home Loan - Standard LVR 55%
$15 monthly ($180 p.a.)
Available for borrowers with bad credit history. Can be used for purchase or refinance even with negative listings on your credit file.

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Westpac Flexi First Option Home Loan - Basic Variable Rate (Owner Occupier, P&I)

Up to $3,000 refinance cashback. A flexible and competitive variable rate loan. Eligible borrowers refinancing $250,000 or more can get $2,000 cashback per property plus a bonus $1,000 for their first application. Other conditions apply.

Logo for St.George Basic Home Loan - LVR 60% to 80% (Owner Occupier, P&I)
St.George Basic Home Loan - LVR 60% to 80% (Owner Occupier, P&I)

Up to $4,000 refinance cashback. A competitive variable rate loan from St.George. Refinancers borrowing $250,000 or more can get $4,000 cashback (Other terms, conditions and exclusions apply).

Logo for Athena Liberate Home Loan - 70% to 80% LVR Owner Occupier, P&I
Athena Liberate Home Loan - 70% to 80% LVR Owner Occupier, P&I

A competitive variable rate mortgage for owner occupiers $0 application and $0 ongoing fees. This interest rate falls over time as you pay off the loan.

Logo for UBank UHomeLoan Variable Rate - Discount Offer for Owner Occupiers, Variable P&I Rate
UBank UHomeLoan Variable Rate - Discount Offer for Owner Occupiers, Variable P&I Rate

Take advantage of a low-fee mortgage with a special interest rate of just 2.49% p.a. and a 2.49% p.a. comparison rate.

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6 Responses

  1. Default Gravatar
    MattNovember 29, 2018

    If I go interest only for a year will it affect my credit rating?

    • Avatarfinder Customer Care
      JhezDecember 6, 2018Staff

      Hello Matt,

      Thank you for your comment.

      As long as you are on time to your repayments, it will not affect your credit rating. Please refer to this page to know what will affect your credit score.

      Should you wish to have real-time answers to your questions, try our chat box on the lower right corner of our page.


  2. Default Gravatar
    LaurenJuly 31, 2015

    If you have had a bad credit rating and it is now clear do they still consider you a risk? (For home loan)

    • Avatarfinder Customer Care
      BelindaAugust 3, 2015Staff

      Hi Lauren,

      Thanks for your enquiry.

      Generally, lenders have different eligibility criteria and will take into account a range of factors, other than your credit rating, when reviewing your application.

      Ultimately, they will review your income, debts and any other existing liabilities to determine your ability to service the mortgage.

      On this page you can read our advice about how to improve your chances of getting approved for a home loan application even if you have a bad credit rating, and you can enquire with a lender that’s more likely to review your application.


    • Default Gravatar
      KanikaAugust 16, 2015

      If a person does not have credit card, can a home loan application be considering on saving account transactions (as in this case there won’t be a credit history)?

    • Avatarfinder Customer Care
      BelindaAugust 17, 2015Staff

      Hi Kanika,

      Thanks for your enquiry.

      When reviewing a home loan applications, lenders will review your income, assets and any existing debt that you have against your name to determine your ability to repay the loan.

      To answer your question, a credit card is not required for a home loan application to be assessed, and the lender will take into account your savings history, among other criteria when reviewing your serviceability.


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