What does your credit score mean for your home loan?

When a lender looks at your home loan application, they are weighing up a number of different things. Your income, for one; where you’re thinking of buying the home; your source of employment; and your credit history.

That’s right, when a lender assesses your suitability for a home loan, they’ll have your credit report handy that in their eyes tells them all they need to know about what you’re like as a borrower.

The crux of a credit report

Your credit history is a detailed report kept on file by entities called credit reporting agencies, which lenders request when considering you for a mortgage. Some of the information they’ll find includes:

• Relatively uncontroversial personal details like your name, date of birth, address and more
• A list of loans or other lines of credit you’ve applied for
• Any defaults (overdue payments you didn’t make for 60 or more days, to the point where a debt collector is involved) or other credit infringements
• Your repayment history – in other words, when your payments were due, whether or not you made them on time, and the dates you missed any

Your credit report also lists more serious infractions, like debt agreements, personal insolvency agreements or bankruptcies. These can stay on your report for as long as 5-7 years after they happened.

All of this culminates in a credit score being attached to your name – a number between 0 and 1,200 that indicates your reliability as a borrower. Veda says the national average is 760, a solid score that can make it much easier to find the right loan. The further below around 600 a score falls, however, the harder it will be.

Getting a copy

It’s probably worth looking at your credit score before you go loan hunting so you know what you’re working with. You can get a free copy once a year, though if it’s an urgent request you’ll have to be prepared to pay.

When you’ve got it, you can update any information or, if need be, flag and rectify an incorrect listing.