Are you looking to buy a home using a home loan? Do you know your credit score can impact your ability to get a home loan? What should be your minimum credit score for home loan in Australia? To get answers to all these questions, continue reading this blog:
Why Does Your Credit Score Matter?
Your credit history matters a lot that helps a lender or bank determine whether to accept your home loan application, and how much they can give you a loan, and based on your credit history, it could affect the interest rate and terms they will offer.Your risk to the bank or lender increases when your credit score declines. In their view, a bigger number appears better. When applying for a loan, your credit score is a crucial step that can reveal a lot about your credit history. This often contains the amounts you have borrowed, your applications and enquiries, as well as your history of repaying these loans.
Credit Score Needed for Home Loans
When applying for a home loan, factors like income, age, and occupation matters a lot. One factor that most home buyers avoid checking is their credit score. Basically, your credit score will help you know how well you manage your debt repayment. If you have a low credit score for home loans in Australia , or a history of defaults, then getting a home loan may become difficult for you because the interest rate will be higher charged by the lenders. On the flip side, if you have a high credit score, then many lenders will be more likely to provide you with a home loan. Therefore, while getting a home loan, you need to meet minimum credit score requirements.
- Below Average Credit Score
If your credit score is below 509, then it is considered a bad credit score. As a result, you’ll come under the high-risk category and many lenders may refuse to lend you money. They won’t give you one even if they do, and they’ll charge you a high interest rate. Grab short-term loans instead, and work on raising your score.
- Average Credit Scores
Credit score ranges between 510-621 is considered an average score where there are chances that you may get a home loan. If your score is above 600, you can apply for a home loan with no need of paying high-interest rates. However, some lenders will still want a high credit score to lend you money.
- Good Credit Score
You are eligible to start the loan application procedure if your score is between 622 and 725. Many lenders would readily grant you a loan after you have a decent credit score if the minimum credit score for home loan is above 600.
- Very Good Credit Score
A credit score that lies between 726 and 832 is considered a very good credit score. At this point, almost every lender will be willing to give you a loan without any issues.
- Excellent Credit Score
If your credit score is between 833-1000, then lenders will consider it an excellent credit score with a low risk of lending you money.
Minimum Credit Score Required for Home Loan
While you can get a home loan on a low or average credit score, you may face a higher APR. It is advisable to apply for a loan if you have a credit score over 630. The acceptable credit score is usually between 660 and 700. Moreover, it is suggested to ask Star Homeloans brokers about the acceptable credit score before applying for a home loan.
Can You Buy a House with Bad Credit in Australia?
Yes, it is possible to purchase a home with bad credit in Australia. However, various restrictions will come with that loan, and you’ll have no excuse for late repayment. The APR will increase every time you miss the due date and you have to pay more than you required.
The blog shares the importance of credit scores for home loans along with categories of credit scores to help you know what category will allow you to apply for a home loan. For further details, you can contact one of our experts at Home Star Homeloans.