Credit Score
What is a credit score?
Your credit score is a calculation of your potential risk, generated by a computer, when you apply for a home loan. It’s built up by your conduct on current credit facilities, your employment, income and overall credit history.
This means that those who have no credit history (due to having no credit facilities), may find it difficult to find a lender who will be willing to lend to them.
Why is a credit history important?
A credit history is important as it allows a lender to see whether they would be taking on a good risk by approving you for a loan; a credit history will indicate your capability to pay back debt. Therefore, if you have no debt, and so can’t demonstrate an ability to pay back loans on time, a lender will not be able to ascertain truly, whether you will pay back your loan.
Some lenders don’t rely on credit history or credit score when they are trying to determine whether they would be willing to lend to you; so a lack of credit history does not automatically mean you can’t get a loan.
How can I build a credit history?
There are numerous ways you can build up a credit history
1. Get a small credit facility that you can pay back on time- whether credit card, mobile phone plan; and ensure they are in your name.
2. Build up tenure with a bank by having you pay go into an account with them.
3. Not all lenders use credit scores when deciding whether they can lend to you, so you may be able to get a loan even with no credit history.
How is my credit score calculated?
In order to calculate your credit score there are a number of considerations that each lender will look at to determine your score; because this is computer generated and varies for each lender, it is almost impossible to know exactly how a bank has calculated your score. Even further, their score may be different to another credit provider’s score. Generally though, banks will consider:
This is the system used in Australia to record your loan enquiries, applications, any blemishes such as defaults judgments or bankruptcies. This factor is said to have the greatest weight in the credit score a lender will give you.
This looks at your account conduct, types of account held, missed payments etc.
The stability of you income, length of employment and living status- here they want to see whether you have longevity in your employment, whether your living situation is stable or are you constantly changing address.
Such as; your asset vs debt ratio, overall borrowing power, your loan to value ratio, purpose of your loan.
Can I get a home loan without a credit history?
Not all lenders use credit scores when deciding whether they can lend to you, so you may be able to get a loan even with no credit history.
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