How Does Credit Scoring Work?
What is a credit score and how does it work?
A credit score is a number given to an individual based on the calculated risk of your application; because it’s different for each lender, the way this score is interpreted may result in varying outcomes.
How is my credit score calculated?
In order to calculate your credit score there are a number of considerations that each lender will look at to determine your score; because this is computer generated and varies for each lender, it is almost impossible to know exactly how a bank has calculated your score. Even further, their score may be different to another credit provider’s score. Generally though, banks will consider;
- Your Equifax credit history: this is the system used in Australia to record your loan enquiries, applications, any blemishes such as defaults judgments or bankruptcies. This factor is said to have the greatest weight in the credit score a lender will give you.
- Your credit history with the particular lender: looks at your account conduct, types of account held, missed payments etc.
- The stability of you income, length of employment and living status- here they want to see whether you have longevity in your employment, whether your living situation is stable or are you constantly changing address.
- Loan related criteria such as; your asset vs debt ratio, overall borrowing power, your loan to value ratio, purpose of your loan.
If you have any concerns about your credit score, contact Mortgage Providers and we will work through it, together.