How Do Banks Verify Credit Score?


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Russell Munfaredi

Russell Munfaredi is the Managing Director and owner of Mortgage Pros. Russell’s wealth of knowledge, unstoppable drive and impeccable service has been the key driver of Mortgage Pros’ success.

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Your credit history, credit enquiries & repayment history determine your credit score, which is sometimes referred to as your credit rating.

A credit report includes your identity information, such as your name, date of birth, residence, and employer. It also contains information about any loans or obligations you have, whether current or old and your repayment history.

If you’re considering applying for a loan, you might be curious about what potential lenders notice in your application. Your lender will review your credit report at some point during the application process, whether you’re applying for a personal loan or a credit card. Why? Because lenders want to know whether you can make your payments on time. However, what precisely do lenders see?

Remember that the higher your credit score, the better your credit rating will be, and the more creditworthy banks and lenders will consider you.

How to calculate your credit score?

Credit reporting bodies or bureaus in Australia, such as Equifax, illion and Experian, calculate your credit scores. You can get your credit report through their websites.

These credit reporting bodies determine your credit score by considering the following:

  • Your current and previous debts, including any issues you’ve had paying it back
  • Loans and loan enquiries you’ve obtained for domestic, personal, or family purposes; to refinance, purchase, or construct property; or acting as a guarantor for a family member.
  • Your existing credit limit
  • All of your credit and retail cards
  • Accounts opened and closed

They may also look into prior bankruptcy filings, default judgments, or court writs against you. Banks and non-bank lenders consider this rating and their risk factors to determine whether or not to approve your home loan.

What is in your credit report? 

Your credit report comprises information about any past or present loans or debts, your repayment history related to these, and identity information like your name, date of birth, residence, and employer.

Your credit report will also include any instances in which you have not complied with loan repayment terms, defaulted on debt, or been declared bankrupt. Additionally, your credit report may contain information about business loans or debts if you own your firm.

Lenders consider your credit report a vital tool to evaluate your creditworthiness, so keeping a solid credit history and routinely checking your credit report will help you get favourable lending terms and make informed financial decisions.

Comprehensive Credit Reporting (CCR)

Positive credit reporting, or Comprehensive Credit Reporting (CCR), is a credit reporting method that offers a more accurate and in-depth assessment of a person’s credit history. It goes beyond standard credit reporting, mainly emphasising negative data like missed payments and defaults. 

The CCR includes a more extended credit history and offers a more thorough overview of a person’s financial actions. This enables creditors to consider a person’s whole credit history rather than just recent issues.

If clients have a record of using credit responsibly, CCR may help them by raising their credit scores. Good conduct is also considered when calculating credit reports, which could help establish credit for those with thin files or short credit histories.

Today, you can access other details, including the type and amount of credit requested, the credit limitations for each account, and the repayment history.

With CRBs having access to more information, people who ensure timely repayments may experience an improvement in their credit scores.

How do banks utilise your credit score?

Your credit score is used in a variety of ways by banks and other financial institutions to evaluate your creditworthiness and make intelligent loan decisions. They use your credit score to assess the risk of lending you money, the terms of the loan and your eligibility for a credit product or loan.

Once you apply for a first home loan or any credit, you authorise the bank to run a credit check on you. Banks and non-bank lenders obtain a credit report from credit reporting bodies.

They can run a credit score bank check in Australia and validate your identity and credit information. This process allows lenders to verify your ability to manage and repay credits or loans.

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Improve your credit rating for a home loan

There are specific ways to enhance your credit rating if you have an error-free credit report but your credit score is lower than expected. You can try the following: 

  • Create a savings account with your bank.
  • Reducing the credit limits or closing some of your current credit cards.
  • Limiting your debts and the number of your credit applications.
  • Make regular, timely payments on your existing loans or credit cards.

That is why managing your credit score is the first step to accomplishing your financial goals, whether you intend to apply for a credit card, finance a car, or buy a home. Take full use of this information and construct a stronger financial future.

At Mortgage Pros, we can assess your credit score for a higher chance of home loan approval. Talk to our senior mortgage brokers at 1300 030 388 today or enquire online and let us assist you on your journey to financial success.

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