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

There's no minimum credit score needed to get a home loan. But borrowers have a better chance if their credit score is Good or higher.

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By

Sarah Megginson

Edited by

Joelle Grubb

Updated

Fact checked

Key takeaways

  • In Australia, your credit score isn't the only determining factor in getting approved for a home loan. Lenders look at your income, spending habits and debts.
  • But your credit score is a good indication of your reliability as a borrower. If your score is "Average" or worse, you'll have a hard time getting a loan approved.
  • And you likely have some credit problems you aren't aware of. Sorting out these problems will improve your chances of approval.

What's the minimum credit score I need to get a home loan?

There's no hard and fast answer here, but borrowers should aim to have at least a Good credit score when applying for a home loan.

Your credit score is less important when getting a home loan compared to getting a car or personal loan. With those loans, having a higher credit score gives you access to lower interest rates and cheaper loans.

But Australian home loans are rarely priced the same way. Borrowers either get approved or they don't, and you don't really get lower rates for having a higher score.

Your credit score is still a very useful number. It gives you a rough idea of your standing as a borrower. And your credit report may highlight problem areas you can fix to improve your chances of success.

What is a 'Good' credit score?

There are 3 credit reporting agencies in Australia. Here's what each agency considers a good credit score.

  • Experian: 625 to 699 is a Good credit score. 700 to 799 is Very Good and 800 to 1,000 is Excellent.
  • Equifax: 661 to 734 is a Good" credit score. 735 to 852 is Very Good and 853 to 1,200 is Excellent.
  • Illion: 500 to 699 is a Good credit score. 700 to 799 is Great. 800 to 1,000 is Excellent.

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Why you should check your credit score before applying

A lender will check your credit score as part of your loan approval. But you can check it yourself before you even start comparing home loans. This is a good idea for several reasons:

  1. You can get a good sense of your financial health.
  2. You can identify credit issues and work to fix them.
  3. You can catch any errors in your credit history and get them removed.

Doing all of this will speed up your home loan application and make the whole process easier.

Why an excellent credit score doesn't mean loan approval is guaranteed

You could have the highest credit score on the scale and still have a loan application rejected. This is because the credit score is only one factor. Your chances of approval are also affected by:

  • How much you want to borrow relative to your income
  • The value of your property in relation to your deposit size (your loan-to-value ratio)
  • Your outstanding debts
  • Your spending habits
  • Your employment history

How can I improve my credit score?

  1. Check your report. If there are any incorrect details or inaccuracies, you can contact the agency and get them fixed.
  2. Make outstanding payments. If you do have any genuine defaults or late payments you've missed, pay them off.
  3. Keep making your normal payments. Pay your utility bills on time and make regular payments on your credit card balance (or even better, pay it off in full each month).
  4. Shrink your debts. You may not be able to realistically pay off all your debts, but reducing them will help. Focus on the highest interest rate debts first.
  5. Lower your credit card limits. If your credit card has a high credit limit this lowers your score. You could reduce the card limit before applying for a home loan.

5 ways to improve your credit score

Credit cards can help or hinder your score

Having a credit card and paying it off in full each month helps you build your credit score. It shows your lender that you are able to service a debt.

But be careful, it can be easy to get into debt with a credit card. Make sure to pay your balance off in full each month and consider applying for a credit card with a low limit.

Avoid over-applying

Don't apply for multiple credit products (credit cards, loans etc) at the same time. This lowers your credit score. Getting rejected for a loan impacts your score temporarily.

When you do apply for a home loan, apply for one loan only. If your application is rejected, fix any issues before applying again.

The fear of rejection
19% of Australians in a recent survey told Finder they avoided applying for a loan or credit card due to a fear of rejection. This fear is strong because getting an application rejected can temporarily reduce your credit score. And lenders rarely provide clear information about why you got rejected.
Source: Finder research

Can I get a home loan with a bad credit score?

If your credit score is Bad or Average, you either lack any credit history or you have some big debts, missed payments or other issues.

People with serious credit troubles may struggle to get any home loan approved.

But there are bad credit home loans aimed at these borrowers. There are lenders who offer non-conforming loans and bad credit products, such as Pepper Home Loans.

Just be aware that these loans have higher interest rates because you're a higher risk borrower.

Compare bad credit home loan options

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 ways to improve it. 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.

Sources

To make sure you get accurate and helpful information, this guide has been edited by Joelle Grubb as part of our fact-checking process.
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Personal finance expert + media spokesperson

With over 20 years of experience in property, finance and investment journalism, Sarah is a trusted expert whose insights regularly appear across television, radio, and print media, including Sunrise, ABC News, and Yahoo! Finance. She has previously served as managing editor for Your Investment Property and Australian Broker, and her expert advice has been shared in the media over 3,500 times since 2023 alone. Sarah holds a Bachelor’s degree in Communications and a Tier 1 Generic Knowledge certification, which complies with ASIC standards. See full bio

Sarah's expertise
Sarah has written 211 Finder guides across topics including:
  • Home loans
  • Personal finance
  • Budgeting and money-saving tips
  • Managing the cost of living
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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

      Sarah Megginson's headshotFinder
      SarahDecember 10, 2021Finder

      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!
      Sarah

    Default Gravatar
    MattNovember 29, 2018

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

      Default GravatarFinder
      JhezelynDecember 6, 2018Finder

      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.

      Regards,
      Jhezelyn

    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.

      Thanks,
      Belinda

      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.

      Thanks,
      Belinda

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