credit score

How Your Credit Score Affects Your Home Buying Power

When it comes to applying for a home loan, just how important is your credit score? It may be a lot more important than you think. This is because your credit rating doesn’t just determine whether or not you’ll gain approval for a home loan – it also affects your borrowing power, your interest rates and your loan terms.

What credit score is needed to buy a house? And what is the minimum credit score for a home loan in Australia?

What Credit Score is Needed to Buy a House?

To qualify for a home loan in Australia, most lenders will prefer you to have a score that is rated “excellent” or at least “good”.

  • Excellent: Most lenders consider this to be a score of at least 800. An “excellent” finance score will give you access to the best mortgage deals.
  • Good: If your score is over 700, it is classified as “good”. This means you are classified as a low-risk borrower, and it should be easier for you to qualify for a home loan. According to a 2023 report by Experian, the majority of Australians have an average score in the “good” range.
  • Bad: If your score is less than 550, you’re classified as a “higher risk” borrower and you could be at risk of having your mortgage application denied.

Checking your credit score can be nerve-wracking but try not to let that stop you. Routinely examining your score is one of the best ways to monitor and, if necessary, work at improving your rating.

Lenders consider any credit score above 800 as "excellent" and a great score for a home loan application.

What is the Minimum Credit Score for a Home Loan in Australia?

Ultimately, the minimum score accepted for a home loan will vary depending on the lender and the type of loan that is being applied for. However, as a general rule of thumb, most lenders prefer for borrowers to have a rating of at least 620 to 650.

If you’re worried about your score being too low, don’t panic! There are still a range of potential lending options available to borrowers with lower finance scores (such as applying for a guarantor loan). The best thing to do is contact an experienced mortgage broker for some expert advice.

How Can I Check My Credit Score?

We’re often asked, “How can I check my credit score?” Fortunately, it’s a very simple process. You can review your score for free from a range of online providers, or you can apply for your full report from a relevant credit reporting agency, such as:

Here’s a video that further discusses this topic.

Talk to ZEP Finance About Your Credit Score

Your finance score plays an important role in applying for a home loan – but if you’re worried about your credit rating, don’t let this hold you back from owning your own home. Reach out to the team of brokers at ZEP Finance for expert guidance on how to improve your credit rating. Take control of your financial future today and contact us for tailored advice.

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