Why do banks over emphasise credit score?

Any general questions you might have in regards to loans and finance.
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Otto Dargan
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Re: Why do banks over emphasise credit score?

Post by Otto Dargan »

Hi Gilchrist and welcome to the forum.

Lenders have various requirements for giving a home loan, such as affordability of the clients, net asset position, acceptable security and location, credit history among others. And credit score is a vital element to approve or decline your application.

You may have failed credit score because your credit file has:
  • Too many credit enquiries - If you have applied for several mortgages, credit cards, or personal loans in the last 12 months.
  • Is blank - If you have no credit history or have never taken out any loans before then you will have a blank credit file. Lenders may consider this as a high risk because you have not yet proven yourself.
  • Is not clean - If you have blemishes like a default, a court judgement, a court writ or a part IX listing.
Your credit score may also have been reduced because of a possible overdraw on your account with a lender or any missed payments on a debt. It should be noted that you may also be likely to fail credit score if you apply with two different lenders around the same time.

Can you let us know what was the reason behind your low credit score?

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

User avatar
Otto Dargan
Mortgage Specialist
Posts: 7730
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
Contact:

Re: Why do banks over emphasise credit score?

Post by Otto Dargan »

Hi Gilchrist,

Below is a list of the common reasons why people fail a bank’s credit score.
  • Credit history: Your credit history is the largest single factor that can impact your credit score.
  • Too many enquiries: Applying for several mortgages, credit cards or personal loans in the 12 months before applying for a mortgage is likely cause you to fail the bank’s credit score.
  • No credit history: If you have never had any loans before then your credit file will be blank. This can be a high risk to the lender as you have not yet proven yourself.
  • Bad credit history: If you have blemishes such as a default, court judgement, court writ, part IX or bankruptcy listing then your credit score will almost certainly fail.
  • Internal credit history: Each bank has their own records of your accounts with them. If you have overdrawn your account or missed payments on a debt then this will reduce your score.
  • Applied with current bank first: If you have already applied with your current bank and then you apply with another bank then you are likely to fail the second bank’s credit score. The second lender is concerned that there is something that they do not know about you.
Also, you could try out credit score calculator and find out your score.

The good news is that not every lender credit scores. If you need help applying for a mortgage then please call us on 1300 889 743 or enquire online to speak to one of our mortgage brokers and see which lenders you will qualify with.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

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