How Your Credit Score Affects Your Home Loan Approval in Australia!

Shaun Chaudhry
Nov 21
2 min read

When applying for a home loan, most borrowers focus on income, deposit size, and interest rates. But one factor quietly influences almost everything behind the scenes:

Your credit score.

Here’s a simple breakdown of why your credit score matters — and how it impacts your loan options.

What Is a Credit Score?

In Australia, your credit score is a number between 0 and 1,200 that shows lenders how you’ve managed credit in the past. It’s calculated by credit bureaus like Equifax, Experian and Illion.

Higher scores = lower risk = better loan options.

Why Lenders Care About Your Credit Score

When a bank reviews your application, they want to know one key thing:

“How risky is this borrower?”

Your credit score helps lenders decide:

✔ If they can approve your loan
✔ What interest rate they offer
✔ How much you can borrow
✔ Whether additional checks are needed

A better score can literally save you money.

What Can Lower Your Credit Score?

Here are common reasons scores drop — often without borrowers realising:

❌ Late or missed repayments❌ Overusing Buy Now Pay Later (Afterpay, Zip, etc.)❌ Applying for too many loans or credit cards❌ High credit card limits❌ Defaults or payment arrangements❌ Incorrect information on your file

Even small things like late phone bills can make a difference.

How to Improve Your Score (Even in 30–90 Days)

Good news: credit scores are not permanent. You can improve them with a few simple habits:

✔ Pay all bills on time✔ Lower your credit card limits✔ Keep BNPL usage low or pause it✔ Avoid multiple loan applications✔ Keep bank accounts out of overdraft✔ Update any incorrect information

Small changes can have a big impact over time.

What Score Do Banks Prefer for Home Loans?

While each lender has their own policy, here’s a general guide:

800+ → Excellent (strong borrowing power)
700–799 → Very good
550–699 → Fair (still eligible with most lenders)
300–549 → Poor (limited options)
Below 300 → Very difficult to borrow

Even if your score is not ideal today, a broker can guide you on improving it and finding suitable lenders.

Proactive Lending Solutions Can Help

Understanding your score is only half the story — lenders all view credit differently. Some are strict, some are flexible, and some even specialise in helping borrowers rebuild.

At Proactive Lending Solutions, we can: