What credit score do you need for a home loan?

A good credit score can boost your changes of 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).

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

What is a credit score?

In Australia, we use something called positive credit reporting, which means your score is calculated based on how often you make payments on time together with how often you are late with your bills. Credit scores generally fall between 0 and 1200, and because of positive credit scoring, it's important to "build your credit" with things like mobile phone plans before you start applying for credit cards and home loans.

A score of between 500 to 700 is generally considered an average score in Australia. When applying for a home loan, you'll want your credit score to be at least average; if you have a below-average credit score, you may have trouble being approved for a home loan from many lenders, because it indicates you're a higher credit risk.

A good credit score is considered to be above 800: if you score in the 800s, you have a better chance of getting a home loan approved.

Anything between 800 and 1200 is considered to be excellent, and you'll be likely to gain home loan approval, provided you meet other loan income and eligibility criteria.

Check your credit report and score for free today

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.

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8 Responses

    Default Gravatar
    joyDecember 9, 2021

    I am 72 years old – I would like to make an offer to my landlord – work perm full time – excellent credit history – been advised the longest loan I can obtain is 8 years !! Good savings – property in WA rented out

      Avatarfinder Customer Care
      SarahDecember 10, 2021Staff

      Hi Joy,

      The reason the banks will only lend you for an 8-year loan term is that they want to make sure you have the capacity to repay the loan for the duration of the loan term. In this case, the bank is willing to accept that you’ll work until you’re 80. If they extended you a 30-year loan, they would be making the assumption you’ll work until you’re 102 – which hopefully won’t be the case!

      You mentioned you own a rental property. This might help you put a case forward to a bank where you say: I would like a home loan. In 8 years’ time, I plan to sell my investment property to pay off my owner-occupier loan in full when I retire from work. With this plan in place, they may be willing to offer you a longer loan term.

      It’s a good idea to contact a mortgage broker, who can help you work out what your options are.

      Best of luck!

    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 for your repayments, it will not affect your credit rating. Please refer to our credit file guide to know what will affect your credit score.

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


    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)

      Default Gravatar
      BelindaAugust 3, 2015

      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.

      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.

      I recommend getting in touch with a licensed mortgage broker. A broker can help you understand your financial position and they can leverage their panel of networks to find a lender that’s more inclined 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)?

      Default Gravatar
      BelindaAugust 17, 2015

      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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