Will a poor credit score affect your mortgage application?

Home loan providers consider a variety of factors when assessing your loan application. One of these is your credit score. But what exactly is a credit score, and why is it so important?

We take a look at how credit scores work in Australia, how they can affect your eligibility to receive a home loan, and what steps you can take to try to improve your credit score if your credit health is in poor shape.


A credit score is used by home loan providers to assess your eligibility to receive a loan.

What is a credit score and why is it important? 

A credit score is typically a number between zero and 1,200 that rates you as Excellent, Very Good, Good, Average or Below Average. The score is calculated based on information contained in your credit report, which details how much you’ve borrowed in the past, your repayment history, outstanding debts and previous credit applications. Australia’s main credit reporting agencies – Dun and Bradstreet, Experian and Equifax – allow you to check your credit score for free online.

Having a good credit score is important when applying for a mortgage, because credit providers, including home loan lenders, will use it to determine whether you’re a reliable candidate for a loan. Bad debts (like defaults and bankruptcies) stay on your credit report for five years, while most bill payments will remain there for two, and won’t look good to lenders.

Can a poor credit score affect the outcome of my mortgage application?

In short – yes.

If you have a poor credit score, a home loan provider may decide that you are risky to lend to. They may decide they cannot lend you as much as you’d hoped, or reject your application altogether.


It’s best to try to improve your credit score before applying for a mortgage, but landing a home loan is still possible without a perfect credit score.

How can I improve my credit score for a mortgage application?

So, can you get a home loan with a bad credit score? It’s possible, but your best bet is to improve it before you apply. If you submit an application for a home loan and are rejected because of a poor credit score, this information will go on your credit file and affect future mortgage applications.

Some things you could do to improve your credit score include:

  • Putting a budget in place to repay any outstanding debts;
  • Only applying for a home loan when you’re financially ready; and
  • Talking to a mortgage adviser about your chances of being approved for a home loan.

Sometimes, patience is your best asset. Due to the expiry date on various debts, a credit score could go up or down without any recent activity, simply because an old debt (whether good or bad) has been removed from your record.