What is my Credit Score?

If you’re reading this article and know the word credit score, this means that you have been affected by the banks automated approval system. You’ve been told that the “computer says no” and nobody even knows why!

To put this in the simplest form credit score works in the exact same way as a women’s magazine “is your partner the perfect one” quiz, questions are asked regarding your partner and each answer chosen is given points according to a set point system. Once it is completed the final point score advises if you have the perfect partner, your score is the financial worlds way of finding the “perfect borrower” for the next 30 years.

All of your information is fed into a computer system and an answer is fed out the other end. Now if you were declined due to credit score this does not mean you are a bad applicant, it means something in your credit file, current situation or loan type did not score you enough points with that bank. Every bank has its own personal choice and has minimum standards it requires for the perfect borrower. However they all have their own opinion as to what the perfect borrower is!

So what happens now? Consider your mortgage broker as the match maker who will provide the make sure the borrower is perfect for the bank, or at the very least make them appear presentable.

What happens if I have failed credit score?

There are still lending institutions out there that do not credit score and will look at an application first with human eyes, not a computer. Each bank has its own set of scoring rules and what kind of partner they are looking for, so if you did not pass credit score for one bank it does not mean you will not pass for another. It now means that a broker will have to make sure it fits.

What are some of the things that will affect the final credit score?

• Usage of the loan – purchase, refinance, home, investment, consolidate debt, funding a business
• Are you applying as a single or in joint incomes
• Length of employment – probation, less than 6 months, more than 6 months, more than 2 years
• How are you employed – permanent full time, self employed > 2 years, casual, contractor
• How many credit enquiries have you had in the last 6 months? 6 or more, less than 6, none
• Credit Impairment – Clear, bankrupt, defaults, unpaid disputes
• Missed repayments on current debts – None, Yes within last 6 months, Yes but not in last 6 months
• Genuine Savings – None, 5 %, 10%, 20%
• Percentage of the property value – less than 80%, 80-90%, more than 90%
• Asset position – >$500,000, >$100,000, > $50,000, I own nothing, my liabilities are more then my assets

Your situation is scored based on these attributes. Ask your mortgage broker which are seen favourably by your bank and either change your situation to suit the bank or change banks so that they will accept your situation. If all else fails then ask your broker to help you apply for a mortgage with a lender that does not use any form of points or grading system for loan applications.

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