This article highlights the importance of your credit score when applying for a loan.
Your credit score is based on an algorithm embedded in the lender software that automatically assesses your creditworthiness before your loan application is even picked up by a credit assessor. Lenders never disclose how they assess your credit score (not even to brokers) but they tend to like employment and residential stability, clear credit files, more assets than liabilities and low numbers of credit enquiries on your credit file. In a nutshell, your predictability is good when applying for a loan with many lenders.
When applying for loans or credit, a question commonly asked by Australian consumers and businesses alike is, “What is my credit score?” In Australia, we have access to credit scores (or ratings), as well as credit files that both you – and lenders – can access. It is important to understand what your credit file is and what kinds of information it contains
You will have a credit file if you have applied, within the past five years, for a credit card, loan or even a mobile phone plan. Your credit file, which is also known as a credit report, can be one of your most valuable assets. It records certain dealings with credit providers and contains a history of overdue debt, defaults and credit applications.
Lenders, or credit providers, make enquiries to credit bureaus, such as Veda (who hold a record of such enquiries on your credit file). They can then access your credit file to assess your suitability for a loan or line of credit. They will do this against their own set of specific criteria, and may use a credit score as part of the application assessment. In some cases they can also use a calculator or estimator to help assess the amount of credit that is suitable for you; e.g., if you are applying for a mortgage.
Not all lenders credit score. Some treat your application on a case by case basis and assess your unique circumstances without reverting to an automated model like credit scoring.