If you’re new to buying property, you’ll want to understand your credit report and how it may impact your home loan application.

Think of your credit report as your financial report card, showcasing how you manage your debts and financial obligations. Here’s why it’s important when you want to take out a home loan.

What is a credit report?

A credit report is a detailed account of your credit history, compiled by credit bureaus. It includes your credit products, repayment history, personal information, defaults, credit applications, bankruptcy records, and credit report requests.

Lenders take into account your credit report when deciding whether to lend you money and when assessing your creditworthiness.

What about a credit rating?

Your credit report includes a credit score, otherwise known as a credit rating.

This value is calculated based on what’s in your credit report. Factors such as how much money you’ve previously borrowed, the number of credit applications you’ve made and your tendency to pay on time will all be taken into account when calculating your credit rating.

Depending on the credit reporting agency, your score may be between zero and 1,000, or zero and 1,200. The higher the credit score, the better.

Where to access your credit report

You can access your credit report for free every 3 months. It’s a good idea to review yours once a year, particularly if you’re planning to buy a property in the near future.

To request a copy, try these credit reporting agencies:

• Experian 1300 783 684
• illion 132 333
• Equifax 138 332

Keep in mind that different agencies may have different information about you, so you might have to reach out to multiple agencies for your credit report.

What if something doesn’t add up

If you notice something is incorrect in your credit report, for example that some of the debts are not yours or that your personal details are wrong, contact the credit reporting agency and ask them to fix it. There shouldn’t be a charge for this.

It’s really important to do this, as failing to do so could jeopardise future credit applications.

Tips to improve your credit score

• Manage credit card balances: Keep balances low and within the credit limit. Pay off balances in full or more than the minimum payment.
• Use credit responsibly: Avoid maxing out cards, make timely payments, and don’t take on excessive debt.
• Review your credit report: Regularly review for changes or errors, promptly reporting inaccuracies.
• Pay your bills on time: Set up direct debits to automatically pay your bills before the due date.
• Improve your credit mix: If your credit mix lacks diversity, this can have a negative impact on your credit score.
• Limit new credit applications: Apply only when necessary to avoid numerous hard inquiries.

Can you get a mortgage with a bad credit report?

If your credit report isn’t in the greatest shape, don’t despair. There may still be ways to secure the finance you need to purchase your home.

Some lenders specialise in ‘bad credit’ home loans and take into consideration any personal circumstances that may have affected your ability to repay in the past. These kinds of loans often come with higher interest rates and fees, but if your options are limited, they may be worth considering.

To chat to us about your finance options, including whether a specialist lender could help you, get in touch today.