How to improve your credit file

Improve your credit file and increase your chance of approval

A credit score is a numerical expression based on a level analysis of a person's credit files, to represent the creditworthiness of that person. Each bank will have their own form of credit scoring to “filter” the type of clients they “Don’t want”.

Generally when a home loan is submitted there are 3 outcomes;

Conditionally approved- this means your file has passed the computers set credit scoring calculation ( Number normally over 750)
Referred – This means the credit score or the details in the file did not quite pass the credit scoring and needs to be manually assessed ( Number between 590- 750)
Reject – It has failed the banks auto credit scoring, without a major change to the application such as reducing the LVR the file will not proceed ( Number normally under 500 OR to many credit hits)

Veda’s Credit scoring color scheme

Below 300 - Red
300- 590- Yellow
600- 720 - Light Green
800-900- Green
900-1200- Dark green

What determines a credit score?

In order of importance;

1. Age of your file : the longer the age the better it is, as it give a bit more "financial confidence" that the data on file is correct and once average out represents a true file and financial characteristics of the client

2. Clients age to Age of file ratio: A subset of point 1, but if a client is 25 and his/her financial credit file age is only 3 years old that's ok (if it's 5 even better)

A client who's 45 and credits file age is only less than 10 years old...this is more common for non-residents or new migrates - so hence your "risk" factor may be placed into this basket.

3. Unpaid defaults- Especially if it's over $500 and it's not a telecommunication one. OR if you have multiple small details listing ( we see this happen a lot when ppl move and forget to update their address and keep track of bills)

4. Listed judgment and defaults – A court jostlement listing or an unpaid default.Still possible to get loans especially if the listing has been > 12-24 month.

5. Number of credit hits in the last 12 month; (more than 4) – The more credit hits you have the more the bank’s system would presume you got “rejected” elsewhere hence why your shopping around. Limit unnecessary credit hit under 5 in a 12 month period. The less the better. 0 is perfect

Click here for more information on high credit hits

6. Type of credit enquires in the last 12 and 24 month - or what veda calls " industry group" if you got a lot of personal loans/ small money loans/ credit cards/ ATO listings/ courts credit listing than this is always going to be worse than Home loans and utility bills/employment agency "information" checks

Click here to check if your lender is part of this indsutry group of "non conforming lender"

7. Employment history - If you switch job to often this will also impact the file as it shows your not stable- the longer you are at one company the better.

8. Residential address history- If you switch place of residency to often this will also impact the file, this also shows stabililty - the longer you are at one place the better.

9. ABN and Directorships- No real impact, unless you have multiple ABN and Directorships (normally over 3)

10. Number of credit hits in the last 24 month and last 5 years - this is to predict if you had any previous possible bad file in the past.

11. Authorized Agents - Last 12 months: This is when your broker orders a credit file OR Veda ( you)...having 2 is generally ok...having multiple "agents" or broker work for you in a short period of time is a bad sign; as it could possibly mean your hiding something.

What is a perfect credit file?

- Long file history, > 15 years
- Low unnecessary credit hits in the last 12 month
- Long employment history
- Long residential history
- No defaults

How to fix a credit file?

Time. Giving the file some time to heal will fix your credit file naturally, around 50-60 points increase every 2 month.

There are credit removal agency you can hire (really they are lawyers who specialize in credit default) to remove/fix any listing that shouldn’t be there.

A Credit score is to determine the “stability” of the client + to weed out the bad or unusual lending behavior type customers.

How to check your credit file and credit score

Email: info@shapehomeloans.com.au

Call: 1300 745626

You can order your own for free here ( Click here to be directed to the free credit check link)