Home loans for people with a good credit score

By   |   Verified by Yvonne Taylor   |   Updated 26 Dec 2022

  • Understand what makes for a good credit score and why lenders reward it.
  • Learn how credit scores can affect home loan interest rates.
  • Find out how to check and even improve your credit score.

A credit score or credit rating is a number that quantifies your creditworthiness. The higher the score, the better you appear to a potential lender.

A credit score rated from ‘good’ to ‘excellent’ is something you can capitalise on to improve your financial life. This is especially true when shopping for a home loan. Read on to learn more.

Unloan Variable Home Loan (Owner)

Unloan Variable Home Loan (Owner)

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  • Get a rate discount every year.
  • No application fees, no account fees, and no exit fees.
  • Borrow up to 80% of your home’s value.
  • Refinancing only.

What is a good credit score in Australia?

Credit bureaus use personal financial information to create a credit file for individuals and businesses, and then use this information to determine a credit score. Both credit providers and individuals can request a copy of an individual’s credit report.

The credit reporting bodies in Australia are:

Experian and illion calculate a score between 0 and 1000, while Equifax provides a score with an upper limit of 1200. As a result, a good or excellent credit score differs between the bureaus.

Reporting agencyVery goodExcellent
Experian700 and 799800 and 1,000
illion700 and 799800 and 1,000

What credit score do you need when buying a house?

Every lender allocates a different level of importance to the loan applicant’s credit score. Banks and private lenders have systems in place to assess the applicant’s credit, working in conjunction with a credit score from one or more credit reporting bureaus. That’s why there is no one right answer to this question.

However, there is a minimum that the majority of home loan providers are looking for a score between 500 and 700. Anything lower than 500 will be considered a high-risk applicant, but that doesn’t mean getting a loan will be impossible, albeit accompanied by a higher interest rate and possibly higher fees.

How does your credit score affect your interest rate?

Lenders offer different interest rates based on different credit scores. Although this isn’t the only factor influencing interest rates, a good or excellent credit score can sometimes result in the market's best interest rate.

An average credit score can still get a decent interest rate, but it will likely be higher than the one offered to applicants with a credit score above 700.

Scores on the lower end tend to have the highest interest rates, and it’s possible they may not even qualify for a loan in the first place.

All of this is true for other types of loans too, such as personal loans and car loans.

Not sure what your score is?

Get your credit score before applying

A very fast and convenient way to continuously check your credit score is with Finty. We will provide you with your credit score, alert you of any changes, and help you see your progress over time.

How do lenders reward a good or excellent credit score?

Lenders prefer those with a good credit score. So much so that they greatly incentivise an above-average score. Some of the benefits include :

  • a much greater chance of having a loan approved;
  • more credit options and greater borrowing power;
  • more leverage when negotiating with lenders;
  • lower interest rates.

Lenders are always trying to avoid clients that will default on their payments or struggle to repay a loan. It is undesirable for lenders to repossess a property and auction it off if the borrower defaults on the loan.

The interest an applicant pays for a loan is the price they pay for borrowing money. The riskier the client looks to a lender, the more they have to pay for credit.

Lenders with low-interest loans available for owners of a high credit score include:

The verdict

There are certainly more home loan options for people with a good credit score. Not only that, they come with better interest rates and lower fees that could be negotiated down even further. A cheaper home loan is arguably the best perk of having a good credit score.

It’s also simply good practice to check your credit score at least annually to know where you stand. This will help you prepare if you do need to make some improvements to it before applying for a home loan. Waiting just a year while you improve your credit score can save you tens of thousands in interest rate payments over two or maybe three decades.

Shopping for a home loan? Want help with the application?Schedule a call with a mortgage broker.