Your credit score is indeed an influential figure in your life – and it pays to work towards improving it consciously.

Lenders look at your credit score, available on your credit file, to determine whether, and how much, they should lend to you. Summing up your financial history in a number, it helps lenders gauge how much risk you pose to them as a borrower.

maximise credit score

What does my credit score mean?
Your credit rating or score is a number between zero to 1,000 or 1,200, depending on the credit reporting agency used. This number is then placed on a five-point scale to help lenders ascertain your creditworthiness or the risk in lending to you.

In general, maintaining a credit score of 740 and above increases the probability of your mortgage application being approved manifold.

Learn more about your credit score.

A good credit score goes a long way in improving your chances of getting that big-ticket home loan to purchase the home of your dreams. Even a difference of a few points in your credit score can translate into thousands of dollars of interest on your home loan. In fact, if you have a bad credit score, you might not get approved at all.

Thus, it only makes sense to improve your credit score before applying for a home loan. In this post, we share with you some simple yet effective ways to perk up your credit score:

Have a credit history – Not having a credit history is almost as bad as having a low credit score. When you file a loan application, lenders want to see how responsible you are as a borrower, but with no credit history, they have no way to figure out your repayment behaviour.

To start, take a phone number or an Internet connection or even a credit card on your name, and ensure you make timely payments, to build a stellar credit history.

Get a copy of your credit report – Before you apply for a home loan, it is best to pull out your credit report online and review it thoroughly for any discrepancies. In case you find any errors, dispute them immediately to have them removed from your file  (You can request a free copy of your credit file on Equifax once every twelve months). 

Don’t apply for new credit – It is best to wait before applying for that car loan or a new credit card until your mortgage is approved, as applying for new credit during the application process can reduce your chances of approval. In fact, taking out a new loan or incurring heavy debts on your credit card after being pre-approved could also derail your home loan application (Do you know what not to do during preapproval?)

Pay your bills on time – Nothing hurts your credit score more than careless payment defaults that stay on your file for up to five years, bringing down your credit score considerably. Be it your credit card payment, EMI or utility bills; make timely payments, every single month, to prevent a black mark on your file.

Tip: Use auto debit facility to ensure you never miss a repayment. In case you are facing financial hardship, contact your credit provider who can offer you hardship assistance, helping you get back to your feet.

Close down unused accounts – Close down any accounts that are unused, including extra credit cards that you don’t use, to reduce your debt-to-income ratio as lenders take into account any potential credit you might incur in the future while calculating your borrowing capacity. It also helps to pay off your existing debts before applying for a home loan.

Timing is everything – Each time you file a mortgage application, a lender makes a ‘hard enquiry’ on your credit file, which brings down your credit score slightly. Thus, by making repeated applications in a short span, you could hurt your credit score significantly.

It makes sense to space out your loan applications, and only apply when you know you have more chances of getting approved. A mortgage broker can help you by putting you in touch with lenders most likely to approve your application, having gone through your case thoroughly. Get in touch with an expert to know more.

Also, see this handy infographic on improving your credit score.

Maximise your savings

There is no doubt that your credit score is an important factor lenders take into account while analysing your mortgage application. Maintaining a good credit score helps you negotiate a lower interest rate and better terms on your home loan, helping you save thousands of bucks in the process. You could also compare broker pre-negotiated home loan deals online to maximise your savings with HashChing.

By Vidhu Bajaj
HashChing Content Writer


HashChing is helping Australians by providing access to the pre-negotiated home loan deals. Obligation free consultation with one of our partner brokers might save you time, hassle and money.

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