Your credit score does not just determine whether a lender approves your home loan application. It influences which lenders will consider your file, the interest rate on offer at lenders who use risk-based pricing, and in some cases how much you can borrow. Most Australians do not check their score until they are already mid-application, which leaves little time to address anything that might be dragging it down.
What is a credit score in Australia?
Credit scores in Australia are calculated by credit reporting bureaus including Equifax, Experian, and illion. Each uses its own scoring model. Equifax is the most widely referenced by lenders: its score runs from 0 to 1,200, with anything above 622 considered average, above 726 considered good, and above 833 considered excellent.
Your score is based on the information in your credit file, including repayment history, credit enquiries, the types of accounts you hold, and any defaults, court judgments, or bankruptcies. Lenders report new information to the bureaus regularly, typically monthly, so your score can move over time as your financial behaviour changes.
What actually goes into your score?
Repayment history carries the most weight. A single missed payment on a credit card or personal loan can lower your score meaningfully, even if it happened years ago. Payments more than 14 days late can be recorded on your credit file as a late payment, and that record stays for 2 years.
Defaults, meaning unpaid debts over $150 listed by a credit provider, remain on your file for 5 years. Serious credit infringements, such as debts listed as gone-away or skipped, can stay for 7 years. Both categories have a significant effect on which lenders will consider your application and on what terms.
Credit enquiries also matter. Every time you apply for credit, whether a credit card, personal loan, car finance, or home loan, a hard enquiry is recorded. Multiple enquiries in a short period can signal financial stress to a lender and pull your score down, which is why the timing and sequencing of applications matters.
How do lenders actually use your credit score?
Lenders do not rely solely on your credit score. They use it as one input alongside your income, expenses, employment history, assets, and liabilities. That said, a low score creates friction at multiple points in the process.
Some lenders have minimum score thresholds below which they will not lend at all. Others will lend at a higher interest rate, treating a lower credit score as a proxy for higher risk. Non-bank lenders and specialist lenders generally have more flexibility here, though they may price for it.
What credit score do you need for a home loan in Australia?
There is no universal minimum. Most major banks prefer an Equifax score above 650 for standard home loan applications. Some non-bank lenders will consider scores in the 500 to 600 range for borrowers with strong income and a clean recent history. For the most competitive variable rates, a score above 750 is generally where lenders start offering their sharpest pricing.
Can you improve your credit score before applying?
Yes, and the 6 to 12 months before a home loan application is a good time to be deliberate about it. The steps that make the most difference are consistent: pay all bills and credit accounts on time, reduce outstanding balances on credit cards, and avoid applying for any new credit during this period.
Closing unused credit cards can also help. Lenders factor your total available credit limit into their serviceability assessment. A card with a $20,000 limit you never use still represents potential debt in the lender’s model, even if the balance is zero.
You are entitled to one free credit report per year from each bureau. Errors do appear on credit files, and they can have a disproportionate effect on your score. If you find an incorrect default or an enquiry you do not recognise, you can lodge a dispute with the relevant bureau to have it investigated and, if the error is confirmed, corrected.
What to do if your score is lower than expected
A lower credit score does not automatically close the door on a home loan. Some specialist lenders are set up specifically for borrowers with impaired credit, though they typically charge a higher rate to offset the added risk. Borrowers in this position sometimes use a specialist lender initially and then refinance to a mainstream product once their credit history has improved.
The most important thing is not to rush the process by applying to multiple lenders in a short window. Each application adds an enquiry to your file. A mortgage broker who works with a broad panel of lenders can identify the most suitable option for your specific credit position before a single application is submitted, which protects your score while still moving forward.
Key Takeaways
- Australian credit scores are calculated by bureaus including Equifax (0 to 1,200), Experian, and illion. Equifax is the most widely used by lenders.
- Repayment history carries the most weight in your score. Late payments are recorded on your file and stay there for 2 years.
- Defaults remain on your credit file for 5 years and significantly affect which lenders will consider your application.
- Most major banks prefer an Equifax score above 650 for standard home loan applications, with the best rates typically available above 750.
- Avoid applying for any new credit in the 6 to 12 months before your home loan application to protect your score from additional enquiries.
- You can access a free credit report once per year from each bureau and dispute any errors you find directly with the bureau.