Which credit report is used for home loans?

A credit check is almost always a part of any lender’s loan approval process. However, lenders may choose to pull the mortgage applicant’s credit report from any of the three credit reporting bureaus operating in Australia. At present, Equifax, Experian, and Ilion are the agencies that collect and analyse information about Aussies’ credit transactions, which include both taking out and repaying debts. Typically, lenders tend to focus on the number and kind of debts the applicant has borrowed in the past and whether they could make repayments in time.

Can I verify the information a lender may access from my credit report?

If you are preparing to apply for a home loan, you should consider checking your credit report. You can usually request a free copy of your credit file once a year from one of the three credit reporting bureaus, either by placing a request online or over the phone. Note that the credit report itself may not mention your credit score but will list the factors affecting it. Also, credit reporting bureaus are required by Australian law to record incidents that have either a positive or a negative impact on your credit score. A long history of positive incidents will likely result in a higher credit score unless affected adversely by more significant negative incidents. Although lenders rely on your credit report, you can check your credit score here regularly to keep an eye on your financial health.

While lenders prefer approving applicants with higher credit scores, they may not reject your home loan application just because you have a poor score. They can, however, ask you to provide more evidence of your ability to repay the loan, pay a higher initial deposit, or charge you a higher interest rate. One way of preempting a less desirable loan offer is to improve your credit score before applying for a home loan. You could, for instance, reduce or consolidate other debts or wait to pay off your previous loan if you’ve taken one out.

What if the lender can’t access the credit report for a home loan applicant?

Most people applying for a home loan will have some form of a credit report, even if they’ve never taken out any other type of credit before. Credit reports include credit products such as credit cards and loans and your ability to pay your bills. Whenever you connect a new utility like a mobile phone or energy account, it will appear on your credit report. You can then work on paying your bills on time and thereby build up your credit score. However, you should be careful not to apply too often for credit, particularly if an application has been rejected. Whether for a loan or a credit card, each credit application is reported to the credit rating bureaus and can count negatively towards your credit score. Multiple applications can suggest creditworthiness issues that only worsen with negative incidents piling up in your credit report.

Some small lenders may offer loans without a credit check but may charge you much higher interest rates or offer less attractive loan terms. Ensure you’re only applying to an organisation holding a valid Australian credit license. If you do take out a loan with a lender without a credit license, your borrowings and repayments may not get reported to the credit reporting bureaus. This would mean your efforts at putting together a credible credit file are wasted. You can also ask home loan lenders about the credit score range they find acceptable and check if they offer another type of credit, such as a personal loan, to help you get your credit score started.

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