For all the people looking to buy a new home in Australia, you should secure a loan before someone else gets that house. But, what’s the minimum credit score for home loan in Australia?
While filling out the loan application, factors like age, income, and occupation are essential. One factor that most buyers neglect to check is their credit score when buying a house. Given that this is a loan, your credit score indicates how well you handle debt repayment.
If you have a low credit score or a history of defaults, getting a loan can be difficult because the interest rate charged by the lender will be higher. On the other hand, if you have a good credit score, many lenders will be more willing to provide you with a loan.
So, while getting a home loan in Australia, you must know the minimum credit limit, which we’ll discuss below.
Credit scores required for home loan in Australia
A credit rating is between 0 and 1000, indicating how well you repay the loan. A higher number denotes that you are excellent, and zero means you never got a loan.
It’s easier to get a loan if you have a good credit score, but even so, it’s not a cakewalk.
Most lenders don’t publicise their credit criteria, so you never know their requirements. Some don’t rely on the credit report and add other factors to keep things more in their favour.
So, while it is not easy to find the minimum credit score, here is a benchmark to help you determine if you are eligible.
Below-average credit score
Having a score below 509 is considered a bad credit score, which takes you to the high-risk category, and many lenders won’t give you a loan.
Even if they decide to provide you with one, the interest rate they charge will be obnoxious.
Our advice is that you don’t apply for a mortgage if your credit score is below 509. Instead, grab short-term loans and try to improve the score.
Average credit scores
Having a credit score between 510-621 makes it an average score, where things start to fall slightly in your favour. If your score exceeds 600, you can apply for a home loan without paying higher interest rates. However, some lenders might still hesitate to give you a loan.
Good credit score
If your score falls between 622 and 725, you are in a good position to begin the loan application process. Once you have a good credit score, many lenders will easily provide you with a loan. You can even visit conventional loan platforms and grab a home loan from there. The best part is that you’ll get lower interest rates.
Very good credit score
A credit score between 726 and 832 brings you to the list of the top 40% of creditworthy Australians. At this point, almost every lender you visit will give you a loan without any issues.
Excellent credit score
If your credit score is excellent (833-1000), the lenders will consider having an extremely low risk of doing business with you. When there are more lenders to choose from, home loans become much more accessible.
Minimum score required
While you can get a home loan on a low or average credit score, you’ll face a higher APR. We recommend going for the loan once you have a credit score above 630.
The acceptable credit score is between 660 and 700, but some lenders might hesitate to offer you a loan. You might need to go above 800 to get a loan without problems.
It would be better to ask the vendor about the acceptable score before asking for a loan. If they have other requirements, make sure to grab a detail of them to make things easy.
Can I get a home loan with a low credit score?
Yes, many lenders will give you bad credit home loans even if you have a credit score below 600. However, that loan has multiple restrictions, and you have no room for late repayment.
Every time you miss the due date, the APR for that particular instalment will increase, and you will have to pay extra fees. On the other hand, some lenders only provide a secure loan, which means you must give collateral as a condition of borrowing.
As a last resort, your lender may sell the collateral you pledged as security for the loan in order to collect on the debt.
If you want to reduce home loans, you may want to consider ways to boost your credit score, like applying for smaller lines of credit and paying them off responsibly.
Follow this if you want to know how to get home loans with a low credit score.
Check out Soho’s finance section to learn more tips on home loans and budgeting.
More on the Minimum Credit Score For a Home Loan in Australia
What is the lowest credit score to get a home loan?
There isn’t a single, strict minimum credit score for getting a home loan in Australia. Different lenders have their own criteria, but generally a score around 600 can be considered the borderline.pen_spark
Can you get a home loan with a score of 600?
Having a credit score of 600 might still allow you to get a home loan, but it could limit your options. Here’s why:
- Higher interest rates: With a 600 score, lenders may perceive you as a slightly higher risk. This can translate to a less competitive interest rate on your home loan, meaning you’ll pay more in interest over the life of the loan.
- Fewer lender options: Not all lenders offer loans to borrowers in this credit score range. You might have a smaller pool of lenders to choose from compared to someone with a higher score.
- Stricter requirements: Some lenders may ask for additional documentation or a larger deposit to offset the perceived risk of a lower credit score.
While 600 might be the borderline for some lenders, it’s generally not considered a good credit score in Australia. A good score is typically in the range of 622 to 725.
The higher your score, the better your chances of securing a home loan with favourable terms.
What is the lowest possible credit score Australia?
In Australia, the lowest possible credit score depends on the credit reporting body you’re referring to. The two main ones are:
- Equifax: Their scale ranges from 0 to 1200, with 0 being the absolute lowest possible score.
- Experian: Their score range might differ slightly, but it also starts at 0 and goes up to a maximum value (usually around 1000 or 1200).
It’s important to note that having a score of 0 is uncommon. It typically indicates a complete lack of credit history in Australia, meaning you may not have borrowed any money before.
