Credit report

What credit report is used for home loans?

A credit check is almost always part of any lender’s loan approval process. However, lenders can choose to pull the mortgage applicant’s credit report from one of the three credit bureaus operating in Australia. At present, Equifax, Experian and Ilion are the agencies that collect and analyze Australians’ credit transaction information, which includes both the underwriting and repayment of debt. Generally, lenders tend to focus on the number and type of debts the applicant has borrowed in the past and whether they can be repaid on time.

Can I check what information a lender can access from my credit report?

If you are preparing to apply for a home loan, you should consider checking your credit report. You can usually request a free copy of your credit report once a year from one of three credit bureaus, either by applying online or by phone. Note that the credit report itself may not mention your credit score, but will list factors that affect it. Additionally, credit bureaus are required by Australian law to record incidents that have a positive or negative impact on your credit score. A long history of positive incidents will likely lead to a higher credit rating unless it is affected by larger negative incidents. Although lenders rely on your credit report, you can regularly check your credit score here to keep an eye on your financial health.

Although lenders prefer to approve applicants with higher credit scores, they cannot reject your home loan application just because you have a bad score. They may, however, ask you to provide more evidence of your ability to repay the loan, pay a higher initial deposit, or charge you a higher interest rate. One way to anticipate a less desirable loan offer is to improve your credit score before applying for a home loan. For example, you could reduce or consolidate other debts or wait to repay your previous loan if you have one.

What if the lender can’t access a home loan applicant’s credit report?

Most people who apply for a home loan will have some form of credit report, even if they have never had any other type of credit before. Credit reports include credit products such as credit cards and loans and your ability to pay your bills. Every time you connect a new utility like a mobile phone or an energy account, it will show up on your credit report. You can then focus on paying your bills on time and increase your credit score. Be careful, however, not to apply for credit too often, especially if an application has been rejected. Whether it’s a loan or a credit card, every credit application is reported to credit reporting agencies and can negatively affect your credit score. Several applications can suggest credit issues that only get worse with the negative incidents that accumulate in your credit report.

Some smaller lenders may offer loans without a credit check, but may charge you much higher interest rates or offer less attractive loan terms. Make sure you are only applying to an organization with a valid Australian credit license. If you take out a loan from a lender without a credit license, your borrowings and repayments may not be reported to credit bureaus. This would mean that your efforts to build a credible credit report are in vain. You can also ask home lenders what credit rating range they consider acceptable and see if they offer another type of credit, such as a personal loan, to help jump-start your credit rating.