What Is The Minimum Credit Score For A Home Loan In Australia?

Did you know that nearly 40% of first-time homebuyers in Australia are rejected for home loans due to insufficient credit scores?

Your credit score acts as a financial report card that determines whether lenders will trust you with their money.

When applying for a home loan in Australia, lenders check your credit score to decide if you’re trustworthy enough to borrow money.

But what’s the minimum score you need?

This blog explains everything about credit scores, how they’re calculated, what lenders expect, and how to improve yours if it’s not quite there.

Let’s dive in!

Understanding Credit Scores

A credit score is a number that indicates how you’ve borrowed and repaid money. It is like a credit report card.

Lenders, such as banks and home loan brokers, will look at it to see whether you ‘qualify’ for a home loan in Australia, and what interest rate you will pay. 

This is based on how ‘risky’ lenders perceive you as a borrower; if you have a ‘high’ credit score this means you are perceived as a ‘low’ risk borrower, while if you have a ‘low’ credit score you may have to convince lenders you are in fact ‘low risk’.

In Australia, credit scores generally range between 0 to 1000 or 0 to 1200 according to the credit reporting agency.

Several different agencies in Australia, have three major providers, Equifax, Experian, and Illion, which provide the score while using their own systems but using similar information to derive your score. 

How Is Your Credit Score Calculated?

Credit reporting agencies use specific details to work out your score. They dig into your financial history to see how responsible you’ve been with money.

Here’s what they check:

• Debt and Repayment History: Have you paid loans or bills on time? Missed payments or defaults can lower your score.
• Bankruptcy or Court Judgments: Any legal issues like bankruptcy or court orders hurt your score.
• Credit and Store Cards: The number of cards you have and how you use them matters.
• Credit Limits: High credit limits can affect your score, especially if you’re close to maxing them out.
• Loan Applications: Applying for too many loans or credit cards in a short time can look risky.
• Guarantor Roles: If you’ve guaranteed someone else’s loan, it’s noted in your report.

By keeping these factors in check, you can boost your chances of a good score. A home mortgage broker can guide you on what to focus on before applying for a loan.

Credit Score Ranges By Reporting Agency

Understanding how different agencies categorise credit scores helps you know where you stand:

What’s The Minimum Credit Score Needed?

So, what’s the minimum credit score for a home loan in Australia? Most lenders prefer a score of at least 650–700, depending on the agency’s scoring system.

For Equifax (0–1,200), a score of 660 or above is typically considered average or better, while for Experian or Illion (0–1,000), you’d want at least 550–625.

However, the exact number varies by lender, as credit scores are just one part of the approval process. A finance broker can help you understand what specific lenders look for.

If your score is below 500 (Equifax) or 550 (Experian/Illion), you’re in the “below average” range. This doesn’t mean you’re out of luck, but you may face challenges, like higher interest rates or the need for a larger deposit.

What Lenders Look For Beyond Credit Scores?

A home mortgage broker will tell you that credit scores aren’t everything.

Lenders also examine:

• Your income stability and employment history
• Your savings and deposit amount
• Your debt-to-income ratio
• Your spending habits and financial discipline

Can You Get A Home Loan With A Low Credit Score?

Yes, it’s possible to get a home loan in Australia with a low credit score, but it comes with hurdles.

Big banks often reject borrowers with scores below 500–550, but specialist lenders offer “bad credit home loans” for those with lower scores.

These loans have specific features:

• Higher Interest Rates: Lenders see low scores as risky, so they charge more interest.
• Higher Fees: You might face extra upfront or ongoing fees, like legal or application costs.
• Larger Deposit: Bad credit loans often require a deposit higher than the usual 20%, lowering the loan-to-value ratio (LVR) to reduce lender risk.

How To Improve Your Credit Score?

If your score is average or below, don’t worry—you can improve it over time.

Here are practical steps to boost your credit score:

• Pay all bills and loan repayments on time. Consistency is key!
• Check your credit report for errors. Contact the agency if you spot mistakes.
• Lower your credit card limits. A lower limit shows you’re not relying heavily on credit.
• Pay off existing debts as quickly as possible.
• Avoid applying for too many loans or credit cards in a short period.
• Steer clear of risky moves, like payday loans, which can harm your score.
• Seek help from a financial counsellor if you’re struggling with repayments.

A finance broker can also advise on specific actions to improve your score before applying for a home loan in Australia.

Want To Secure Your Home Loan With Ease?

Are you confused about credit scores or are you worried about finding a home loan in Australia? Don’t! Let us take the hassle out of this process. Credit Hub is the best home loan broker in Melbourne.

With over 20 years experience, our team will negotiate on your behalf, with 35+ lenders, to procure you low rates as low as 5.14% p.a. for a home loan that is tailored to your circumstances.

Credit Hub has smart technology and experience based management service. We provide free property reports, a rapid online pre-qualification that’s not harmful to your credit rating, and continued support to save your money!

Disclaimer:

The information presented by staff or employees of Credit Hub and its associated companies is provided for general informational purposes only. We do not guarantee the accuracy, completeness, or timeliness of the data or views presented. Audience members should conduct their own research and verify any information before relying on it. Credit Hub and its associated companies are not liable for any errors or omissions, or for any actions taken based on the information presented.