Applying for a Home Loan? Here's Why You Should Check Your Credit Score First

If you're thinking about buying a home, refinancing, or investing, you're probably focused on things like saving a deposit, comparing interest rates, and working out how much you can borrow.

But there's another part of the process that's often overlooked: your credit score.

While your credit score isn't the only thing lenders may consider when assessing a home loan application, it can form part of the overall picture. Taking the time to check your credit report before applying for finance may help you understand where you stand and identify any issues before they become roadblocks in your property journey.

What is a Credit Score?

A credit score is a number calculated using information from your credit report. It helps provide an indication of how you've managed credit and financial commitments over time.

Your credit report may include information about:

• Your repayment history
• Current and previous credit accounts
• Credit enquiries
• Defaults and other credit-related listings
• Your income and employment history
• Existing debts and liabilities
• Living expenses
• Savings and deposit size
• The type of property you're purchasing

When assessing a home loan application, lenders may review your credit report alongside a range of other financial factors.

These may include:

• Your income and employment history
• Existing debts and liabilities
• Living expenses
• Savings and deposit size
• The type of property you're purchasing

That's why it's important to remember that a credit score is only one piece of the puzzle when it comes to applying for a home loan.

Why Check Your Credit Score Before Applying for a Home Loan

Checking your credit score before applying for finance may help you avoid surprises later in the process. 

It can be an opportunity to:

• Understand what's currently recorded on your credit file
• Identify any incorrect or outdated information
• Review previous credit enquiries
• Detect signs of potential fraud or identity theft
• Better prepare for conversations with a mortgage broker or lender 

If there's an issue with your credit report, finding it early may give you more time to investigate and address it before lodging a home loan application. 

What Can Affect Your Credit Score?

A range of factors may influence your credit score over time. 

Missed or Late Repayments

Your repayment history may form part of your credit file. Missing repayments on loans, credit cards or other financial commitments could affect your credit profile. 

Making repayments on time may help demonstrate responsible credit behaviour over the long term. 

Multiple Credit Applications

Applying for several forms of credit within a short period may be reflected in your credit report. 

This can include: 

• Credit cards
• Personal loans
• Car loans
• Buy now, pay later services

While applying for credit isn't necessarily a problem, multiple applications over a short timeframe may raise questions during a lending assessment. 

Default and Adverse Listings 

Defaults, court judgments, debt agreements and bankruptcy events may remain on your credit file for a period of time. 

Depending on a lender's policies, these listings may be considered as part of the home loan assessment process. 

Identity Theft and Fraud

Sometimes unexpected enquiries or unfamiliar accounts can appear on a credit report due to identity theft or fraudulent activity. 

Regularly reviewing your credit report may help you identify these issues sooner and take action if required. 

How Do You Check Your Credit Score

In Australia, you can access your credit report through credit reporting agencies such as Equifax. 

To verify your identity, you may be required to provide documents such as:  

• Drivers license
• Passport
• Medicare card

Once your report is available, you can review information including:  

• Credit enquiries
• Open and closed credit accounts
• Repayment history information
• Defaults and adverse listings
• Your credit score

It's worth taking the time to review the information carefully and make sure everything appears accurate and up to date

What If You Notice a Problem?

If you find information on your credit report that doesn't look right, it may be worth investigating further. 

In some situations, inaccuracies can be corrected, while more complex issues may require additional support or guidance. 

For borrowers seeking assistance with credit file concerns, specialist providers such as Clear Credit Solutions may be able to help review your credit report and explain the options available based on your circumstances. It's also worth noting that when assessing your borrowing options, Rate Money uses Access Seeker Reports, which are accessed as an enquiry that does not leave a footprint on your credit file and therefore does not impact your credit score. 

Having a credit report that is not clear does not prevent you from obtaining a loan, it may however limit the options you have available and impact on the loan interest rate. Your Rate Money specialist can assist you with navigating your options. 

How Rate Money Can Help

Checking your credit score is just one step in preparing for a home loan. 

Understanding your borrowing capacity, managing existing commitments, building a deposit and choosing a loan that suits your needs can all play a role in achieving your property goals. 

Where credit file issues are identified, Rate Money can work with you and, where appropriate, refer you to trusted specialists such as Clear Credit Solutions to better understand and address any credit reporting concerns. 

Whether you have a clear credit report or blemishes due to defaults, judgements, writs and arrears, the team at Rate Money can help you understand your options and navigate the lending process with confidence.