(not to be confused with loanScore) A lender uses a credit score to determine a borrower’s risk profile. In Australia this is made up of two numbers:
All the information about your credit history is available in your credit file. This information is analysed using the Equifax Credit Score – a model that predicts the risk a lender would take in lending you money. Once you submit an application for a home loan, the lender will request your credit file. They use its rating to calculate your overall credit score alongside other key details from your application:
Most lenders will not allow you to see the credit score that they give you; they will only advise you on the outcome of your application. However, you are able to access the credit score from your credit file. This ranges from 0 to 1200. Higher scores indicate lower credit risk. A score of 700 and above is considered ‘good’.
Your credit file contains information from credit providers and the public record. It will include:
In Australia, you can access your credit file for free once a year by contacting one of the following Credit Reporting Bodies (CRBs):
You can improve your credit score with good financial management:
Your credit score from your credit file will remain the same – at a point in time – regardless of which lender you choose to apply for a home loan with. However, your overall credit score will vary from lender to lender. Lenders calculate this score not only by the information on your credit file, but also on the information you provide in your application. Each lender has a different method of determining this score – so some may assess you more favourably than others. An uno adviser can look at your personal circumstances and advise you on which lenders are more likely to approve your application. This can help you avoid having your application rejected and protect your credit file from the negative effects this could have on it.
A lender takes information from your application and credit file and uses their own algorithms to calculate your credit score. They will base their decision on this computer-generated result, which could be: