Improve your credit file and increase your chance of approval

A credit score is a numerical expression based on a level analysis of a person’s credit files, to represent the creditworthiness of that person. Each bank will have their own form of credit scoring to “filter” the type of clients they “Don’t want”.

Generally when a home loan is submitted there are 3 outcomes;

Conditionally approved – This means your file has passed the computers set credit scoring calculation ( Credit score normally over 750).
Referred – This means the credit score or the details in the file did not quite pass the credit scoring and needs to be manually assessed ( Credit score between 600- 749).
Reject – It has failed the banks auto credit scoring, without a major change to the application such as reducing the LVR the file will not proceed ( Credit score under 600 OR to many credit hits).

Note smaller banks accepted credit score as low as 200.

Equifax ’s Credit scoring colour scheme

  • Below 300 – Red
  • 300- 590- Yellow
  • 600- 720 – Light Green
  • 800-900- Green
  • 900-1200- Dark green

What determines a credit score?

In order of importance;

1. Age of your file – The longer the age the better it is, as it give a bit more “financial confidence” that the data on file is correct and once average out represents a true file and financial characteristics of the client

2. Clients age to Age of file ratio – A subset of point 1, but if a client is 25 and his/her financial credit file age is only 3 years old that’s ok
VS
A client who’s 45 and credits file age is only less than 5 years old…this is more common for non-residents or new migrates – so hence your “risk” factor may be placed into this basket.

3. Unpaid defaults – Especially if it’s over $500 and it’s not a telecommunication one. OR if you have multiple small details listing ( we see this happen a lot when ppl move and forget to update their address and keep track of bills)

4. Listed judgment and defaults – A court jostlement listing or an unpaid default.Still possible to get loans especially if the listing has been > 12-24 month.

5. Number of credit hits in the last 12 month; (more than 4) – The more credit hits you have the more the bank’s system would presume you got “rejected” elsewhere hence why your shopping around. Limit unnecessary credit hit under 5 in a 12 month period. The less the better. 0 is perfect

More information on high credit hits

6.Type of credit enquires in the last 12 and 24 month – or what veda calls ” industry group” if you got a lot of personal loans/ small money loans/ credit cards/ ATO listings/ courts credit listing than this is always going to be worse than Home loans and utility bills/employment agency “information” checks

check if your lender is part of this indsutry group of “non conforming lender”

7. Employment history – If you switch job to often this will also impact the file as it shows your not stable- the longer you are at one company the better.

8. Residential address history- If you switch place of residency to often this will also impact the file, this also shows stabililty – the longer you are at one place the better.

9. ABN and Directorships- No real impact, unless you have multiple ABN and Directorships (normally over 3)

10. Number of credit hits in the last 24 month and last 5 years – This is to predict if you had any previous possible bad file in the past.

11. Authorized Agents – Last 12 months: This is when your broker orders a credit file OR Veda ( you)…having 2 is generally ok…having multiple “agents” or broker work for you in a short period of time is a bad sign; as it could possibly mean your hiding something.

What is a perfect credit file?

  • Long file history, > 15 years
  • Low unnecessary credit hits in the last 12 month
  • Long employment history
  • Long residential history
  • No defaults

How to fix a credit file?

Time Giving the file some time to heal will fix your credit file naturally, around 50-60 points increase every 2 month.
There are credit removal agency you can hire (really they are lawyers who specialize in credit default) to remove/fix any listing that shouldn’t be there.
A Credit score is to determine the “stability” of the client + to weed out the bad or unusual lending behavior type customers.

How to check your credit file and credit score

Contact us for a free credit file check and explantion on your file ( NO CREDIT HITS, our one is a “soft hit”)

Email: info@shapehomeloans.com.au
Call: 1300 745626