Melbourne’s Best Independent Mortgage Broker – available 7 days a week

How Credit Worthy Are You?

How Credit Worthy Are You

Share This Post

One of the greatest perks in life is access to credit. It opens the doors to many important financial decisions, such as house and lot financing. However, before you can get a loan approved in Australia, your credit score or credit rating needs to meet the requirements.

In this article, mortgage experts What If We Finance discuss the following:

  • What is a credit score?
  • How does a credit score indicate creditworthiness?
  • How do you know if you have a bad credit rating?

What is a credit score?

Your credit score is a statistical number that evaluates your creditworthiness. In other words, it measures your ability to repay a loan in a reasonable time with reasonable terms. Most lenders in Australia use credit score ratings of a potential borrower to assess the individual’s ability and probability of repaying debt.

Your individual credit score ranges anywhere from 300 to 850. The higher your credit score, the more financially trustworthy you appear in the eyes of banks and credit unions.

How does a credit score indicate creditworthiness?

Having a good credit score is crucial as it determines your loan eligibility. If you have a good credit score, banks and other lenders are confident that you will be able to pay off the loan according to the terms of the agreement. This also works for other mortgage options such as home loan refinancing.

Australians, especially those who have just recently gotten access to credit, need to start being conscious and aware of their credit behaviour. Their credit behaviour will ultimately affect their ability to make future investments and eligibility for credit. Each time you set major financial goals, such as a holiday or buying a new home, your credit score is going to form a part of your entire financial history.

So, how does a credit score indicate creditworthiness? Establishing and maintaining a good credit score lets you enjoy the following benefits:

  • Improved chance for loan approval – With a good credit score, you can apply with confidence for the mortgage that best suits your requirements and financial situation.
  • Low interest rates on loans – If you have a good credit score, you’re most likely to qualify for the lowest interest rates and pay lower finance charges on mortgages.
  • Better negotiating power – Good credit score provides you with a great opportunity to negotiate lower interest rates for your mortgage.
  • Approval for higher limits – Banks will typically let you borrow more money if you have a good credit score. That’s because you’ve demonstrated that you’re creditworthy and you can pay back what you borrow on time.
man checks his credit score

How do you know if you have a bad credit rating?

Banks, lenders and other financial institutions in Australia each have their own processes and standards for rating credit scores. While they won’t exactly disclose their internal processes of computing credit scores, here are some indicators on how banks check the creditworthiness of a customer.

  • Payment history – shows all the payments you make with a bank and also indicates whether you’ve been paying on time or not.
  • Amount owed – shows the balance you still owe to your bank. If you frequently max out your credit cards, you likely delay your payments compared to those who borrow within reasonable limits.
  • Length of borrowing money – gives an estimated timeline on how long you’ve been paying for a specific loan.
    New credit – shows the number and frequency of new accounts created with the financial institution.
  • Types of credit used – banks and lenders check if you have multiple accounts such as a personal loan, a car loan or a business loan.

Credit scores typically range from 300 to 850. Traditionally, people with scores of 579 or lower are regarded to have bad credit. Credit scores between 580 and 669 are labelled fair. Those with scores 670 and above are the ones who won’t have trouble securing loans and enjoying lower interest rates.

How do you know if you have a bad credit rating? You can get your credit score and report for free from agencies such as:

You have a right to get a copy of your credit score and credit report for free every three months. To keep track of your credit rating, it’s best to get a copy at least once a year. You can typically access your credit report online within a day or two. You can also wait to receive your credit report after 10 days via mail or email.

Alternatively, you can get your credit rating from an online provider of credit scores. You just have to sign up and agree to their privacy policy, which usually lets them use your personal details for marketing. After you sign up, you can opt-out of this. However, make sure to avoid sites that ask you to give them your credit card details or requests for payment.

To learn more about topics such as “How does a credit score indicate creditworthiness?” don’t hesitate to contact What If We Finance today.

Get updates and learn from the best

Subscribe To Our Newsletter

More To Explore

EXCELLENT
176 reviews on
Matthew B
Matthew B
2022-06-05
Looking at the reviews for What If We Finance, it comes at no surprise to see so many 5-stars. Spiro handled the mortgage part of my girlfriend and I purchasing our first home. He made himself available to us around the clock and ensured that we were across the entire process and felt as comfortable as possible. We're very fortunate to have gone about buying our first home with Sprio and we'd be more than happy to use him for future purchases and to refer on to family and friends. A big shout out to Agnes also who busily works away in the background and also does an incredible job. You guys are the best!
Read more
hari gowtham
hari gowtham
2022-06-03
Very happy with the results from Spiro from start to finish. Spiro and his team are very knowledgeable and have a very quick turnaround time. Couldn't be more happier with the service. Definitely my go-to person for upcoming purchase.
Read more
Gary Shekhter
Gary Shekhter
2022-06-02
Great broker and trustworthy. Honestly had seen 5 brokers and fund this wonderful guy. Who helped from start to finish fast and had our loan in no time at all. Thank you again champ you did an amazing job
Read more
Leonie Kemp
Leonie Kemp
2022-05-29
Thank you Spiro and Agnes for helping with the purchase of my first home. I needed to arrange finance quickly and Spiro did a fantastic job letting me know the best options for me and pushing to get the pre-approval so I didn't miss out on purchasing my home. Everything went very smoothly, thanks for helping make my first property purchase straightforward.
Read more
S S
S S
2022-05-28
Thank you Spiro and team for your help in financing the mortgage for the recent property purchase. Spiro provided timely advise, guided me on the process and was swift in processing the documents. His friendly attitude makes the process even better. Thank you once again.
Read more
Anita Naughton
Anita Naughton
2022-05-27
As a first home buyer I had very limited knowledge on what I needed to do. I searched for a broker and What if we finance stood out due to reviews. I had my first session with Spiro and never looked back! The whole process was seamless, I felt supported and could always connect with Spiro when needed. Spiro and Agnes are experts in what they do and I would highly recommended anyone looking for finance to choose What if we finance. I will be a lifelong customer and look forward to buying our next house with their support.
Read more
Mahmoud Al Kilzi
Mahmoud Al Kilzi
2022-05-25
Spiro & his team did a great job by getting my loan sorted in time. I would recommend them to family & friend. Great work guys much appreciated.
Read more
Rebecca Zeeman
Rebecca Zeeman
2022-05-20
Spiro and Agnes provided great help and advocacy in getting us our home loan. We felt they were always available and were super efficient in getting it all done on time! The process was so simple and without stress thanks them both.
Read more
Irish Azcuna
Irish Azcuna
2022-05-09
I can’t thank Spiro and Agnes enough for making my first home purchase so efficient, stress-free and seamless! If I could give more than 5 stars I would. As a first home buyer applying for one or the government’s schemes, my situation would have been so complicated that I never imagined being able to complete the process in such a short time. Spiro’s in-depth knowledge, invaluable and always-available support, and genuine willingness to help get me the right mortgage for my situation, made everything possible. His pragmatic advice even helped me decide on the right property for us, which would help us achieve our long-term goals. I highly recommend Spiro and his team. We will definitely engage their service again for our next property. They are the best!
Read more
Renee Briggs
Renee Briggs
2022-05-02
Spiro is reliable, has your best interest as his top priority and is fast to get great results. We wouldn't ask anyone else for their professional opinion- Spiro is the best in the business.
Read more