There is plenty of talk in the market at the moment about interest rates. Lenders are offering large discounts for new business or rebates to refinance. What they don’t talk about is how they look at your home loan application.

The term credit score is becoming more main stream but what does it actually mean? Each lender has their own policies they apply in making a decision on a home loan package, how much overtime income they will use, whether they will give a loan to someone on probation, etc.

A credit score is a form of ranking applied to you as a person, it is based on a range of factors which can include simple things like your age, whether you have a drivers license, through to how many credit enquiries are on your Veda file, or if you have a default.  Each lender has their own scorecard based on the performance of their individual loan books, meaning there is no standardised credit scoring, where with one lender you may score 900 with another it might be 850.

Each component adds or subtracts to your score and allows the lender to develop a position on whether they would be prepared to give you a home loan.  Can you influence your credit score? The answer is yes, simple thing like making sure you include all phone numbers on an application, have steady employment, and repaying on debts regularly can help in increasing your credit score.

Add the credit score to the various policies of the lenders and it may be the difference between actually having a loan approved or declined, or how much a lender is prepared to lend to you.

So, it is not just about interest rates any more. A good mortgage broker can help you navigate through all the lenders, the interest rates and policies. They can give guidance on how best to maximise your opportunity for getting a loan. A decline now may not be a decline in six months or a year.

See also:

How to get a home loan