Will Your Credit Score Stop You From Getting A Loan?
Your credit score is a financial fingerprint that you might not think about until you’re ready to borrow money, however, it plays a critical role in determining how much you can borrow from the bank. Here we will help to unravel the mysteries of credit scores and explain their impact on your borrowing capacity.
Step One: What Is a Credit Score 💳 ?
A credit score is a three-digit number that reflects your creditworthiness. In Australia, credit scores typically range from 0 to 1,200. The higher the score, the better your credit health. There are three companies in Australia where you can obtain your credit score, for free, once every three months. It is a good idea to do this at least once a year to keep your finger on the pulse of your financial success.
Get your credit score from any of the businesses below:
When it comes to assessing a loan application, the main credit score source the banks use is Equifax.
At Go Mortgage, we leave no stone unturned in our mission to secure the best loan options for you. That’s why, when your dedicated broker assesses your loan, they meticulously examine your credit file. It’s our way of ensuring that every aspect of your financial journey is optimized.
We believe in transparency, trust, and, most importantly, empowering you with the information you need to make the best financial decisions. So, rest assured, we’ve got your back!
Step Two: Why Does Your Credit Score Matter?
Determines Lender’s Trust: Lenders use your credit score to assess the level of risk associated with lending to you. A higher score indicates responsible financial behaviour, while a lower score may raise concerns.
Interest Rates: Your credit score often influences which lender may consider your application, which can then determine the interest rate offered. A worse score can push you into a non-conforming or specialist lender with a higher rate, potentially costing you thousands of dollars in interest.
Loan Approval: Some home loans or banks may have minimum credit score requirements. A low score could lead to loan rejection, while a higher score improves your chances of approval.
Your credit score is a powerful financial tool that shapes your borrowing potential. It affects the amount you can borrow, the interest rates you’re offered, and even your loan approval chances. Maintaining a healthy credit score requires responsible financial habits, such as paying bills on time and reducing debt. By understanding the link between your credit score and borrowing potential, you can make informed financial decisions that set you on the path to achieving your goals.
Our Tip: Don’t panic if your credit score is not so great 🤨. We outline some simple strategies below to improve your credit score.
Improving Your Credit Score
Make On Time Payments: Pay your loans late and this will be recorded on your credit file, negatively impacting your credit score. By making payments on time, you ensure your credit score is nurtured and preserved.
Reduce Your Debt: Lowering credit card balances and paying off outstanding loans can have a positive impact on your credit score.
Review Your Credit Report: Regularly review your credit report for inaccuracies and dispute any errors you find.
Use Credit Responsibly: Avoid opening multiple new accounts at once and apply for credit only when necessary. Regular and multiple applications for credit can negatively impact your credit score: especially for things like BuyNowPayLater (Afterpay, ZipPay, etc) pay day lenders, personal loans, and credit cards.
Maintain Older Accounts: The length of your credit history can influence your score, so keeping older accounts open can be beneficial.
Have A Budget: A powerful tool in your own arsenal is budgeting. Our simple budget planner will help get you started and give you a picture of your financial position.
If you want to talk to us about the health of your credit file and your loan options, simply click to get in touch or call call 1300 855 244.
Let’s Build Your Future, Let’s Go! 🌟🚀