Home loans for people with a very good credit score

Our credit score reflects how we behave when we borrow money. This is why lenders value a very good credit score so highly. There are many benefits to having a healthy credit score. Getting approved for a home loan may be the best one.

In this article, I will cover the following:

• What is considered a ‘very good’ credit score, and why lenders reward it.
• How a good credit score will affect your home loan application.
• How to maintain a very good credit score, which is especially important in the run-up to submitting your application.

So for everything you need to know about applying for a home loan with very good credit, read on.

What is a very good credit score in Australia?

A credit reporting body (CRB) will determine this score, and there are three main ones in Australia. They are:

• Equifax
• Experian
• illion

Experian and illion score between 0 and 1,000. Equifax scores a maximum of 1,200.

Track your credit score with Finty. Monitor your repayment history and get notified when it changes.

How does having a very good credit score affect your home loan?

If you are applying for a home loan, having a very good credit score will affect you positively. In fact, falling into this category places you in the top 40% of creditworthy Australians. This will make lenders much more likely to approve your home loan.

You may even have more home loan product options available to you. Having a good credit score could also get you a better interest rate and possibly increase your borrowing power.

How do lenders reward a ‘very good’ credit score?

Lenders of all types will incentivise a very good credit score. They do this by way of certain benefits, available only to those with a higher credit rating. Some of these benefits include:

• more options regarding home loan products and package;
• a higher than average borrowing limit;
• lower interest rates;
• a better position to negotiate the terms of the loan with lenders.

Incentivising a healthy credit score is logical for lenders — they want to know that you are a responsible candidate when it comes to borrowing money. If you have a substantial track record of making prompt repayments on other credit, you’ll likely keep doing so for a new loan.

Lenders want to avoid a candidate that will default or be late on payments. Additionally, if a situation arises where the borrower can’t pay back the loan, the mortgage provider may lose a lot of money, even if they repossess and sell the property down the line.

If a lender does offer you a low-interest rate based on your credit score, it’s still important to compare them online. That way, you select a loan with the best parameters for your specific goals. Some of the lenders offering low-interest rate loans are IMB Bank, Loans.com.au, Yard, and HomeLoans.com.au, just to name a few.

How to maintain your credit score through the application

With comprehensive credit reporting, you can easily drag your credit score down. This has made it very important to consciously maintain a high credit score, especially if you’re applying for a loan.

• It’s imperative to make timely repayments. This makes up your repayment history, which is a major factor in comprehensive credit reporting. If you set up automatic payments, you’ll never miss one due to forgetfulness.
• Try your best not to apply for any unnecessary credit. Making too many credit applications can adversely affect your score. Instead, open a savings account and automate monthly deposits into the account.
• Reduce your available credit. Lenders will look at your combined available credit, and they don’t tend to like there being too much. In their view, it’s risky.
• Make sure that your credit cards are not at their limit. This will adversely affect your credit score.

The verdict

Simply put, there are more home loan options for those with a very good credit score. The added benefits include lower interest rates and increased borrowing power. If a high credit score results in a cheaper home loan, it’s certainly worth putting in the effort to increase it.

That is why it’s essential to keep track of your credit score on a regular basis. If you know where you stand, you can either go ahead with an application or wait a bit longer and improve your current score.