1. L o a n W i z e – W i z e U p t o y o u r B e s t F i n a n c i a l D e c i s i o n Page 1
Home Loans
Investment Loans
Business Loans
Commercial Property Loans
Asset Finance
Fact Sheet: Credit Scoring
What is it?
Your credit score is a automated computer generated
assessment of the risk of your loan application and of how
risky you are to a creditor. For us, this means how risky your
home loan application is to a potential lender. Your credit
score is calculated entirely by computers using information
from your loan application and credit file without any human
input. In Australia it is specific to each lender. In other words, your credit score will be different
depending on which lender you apply with. Your score will result either in your loan being
approved, declined or referred to a credit officer for manual assessment.
So how does your credit score work? And how do lenders calculate it?
What information is used to calculate my score?
Your home loan application contains a huge amount of data that the lender can use to assess
your situation. The banks do not specifically publish the exact algorithms and information that
their system uses to calculate your score. They prefer to keep this a secret. However as a
general rule, the following information will be used to calculate your score:
Veda Advantage credit history: If you have applied for too many loans recently then you
will have a high number of “enquiries” on
your file, which will lower your score. Any
blemishes such as a default, court
judgement or bankruptcy listing will have a
significant negative impact on your credit
score. Your credit history is the single most
important factor used to calculate your
credit score.
Your history with the bank: If
you are an existing customer of a bank
then their system will search all of your accounts, credit cards, personal loans and home
loans and will count the number of times you have overdrawn an account or been late with a
payment. Having just one or two missed payments in the last 12 months is enough to result
in your loan being declined.
Stability: The bank’s system will assess how long you have lived at your current address
and how long you have been in your job for. People who have been less than six months in
their job, or living at their current address for less than six months, will have a lower credit
score.
Asset position: Your asset position must “make sense” when cross referenced with your
income and your age. High income earners with no assets will have a lower score. If you
have saved a significant amount of money then this will have a large positive effect on your
credit score.
Liabilities: Lenders are well aware that people with several unsecured debts such as credit
cards and personal loans are a higher risk than people who have few debts. In particular,
people who have more debts than they have in assets will almost certainly fail the banks’
scoring systems.
Borrowing power: If you can only just afford the debt then you are unlikely to be able to
cope if your situation changes. Lenders view people who can easily afford the loan as being
a much lower risk.

2. L o a n W i z e – W i z e U p t o y o u r B e s t F i n a n c i a l D e c i s i o n Page 2
Home Loans
Investment Loans
Business Loans
Commercial Property Loans
Asset Finance
LVR: The Loan to Value Ratio of your home loan is the percentage of the value of the
property value or purchase price that you are borrowing. The lower the LVR, the lower the
risk your loan is to the bank.
Loan size: Larger loan sizes are typically a higher risk than smaller loan sizes. For this
reason, if you are borrowing over $1,000,000, then it will be more difficult to pass the
lender’s credit score.
Loan purpose: The most common loan purposes ranked from the lowest to the highest risk
are purchasing a home, purchasing an investment property, refinancing, business purposes,
consolidating debt and undisclosed purposes.
Your credit history with Veda Advantage, including your VedaScore, is without a doubt
the single most important factor that the lenders use to calculate your credit score.
What is a credit file?
A credit file is a record of your credit history and is
maintained by agencies such as Veda Advantage. This
information can be accessed by other financial
institutions, such as the banks, who use it to determine
your risk as a potential borrower. If the banks can see
a lot of irregularities on your credit file such as unpaid
debts and missed payments then they will decline your
loan application. It is possible for an individual to have
more than one credit file. This is common if you have changed your name, usually due to
getting married. Your Credit Score will be calculated using the combined data of all of your
credit files. As of 2014 your credit file also includes positive credit reporting data such
as a record of your on time repayments on your current debts. This gives lenders a
more accurate picture of your current situation.
What information is listed in my credit file?
The lenders are very cautious in lending money to borrowers who have a bad credit history that
is either ongoing or where the adverse listings have not been cleared, therefore it is important
to know what your credit history is like. The following information is recorded on your credit file
and can be seen by the banks and lenders:
Your full name, date of birth, gender, address, previous address, drivers licence number,
employer and previous employer.
Records of the timeliness of the last two years repayments for your current debts.
Company directorships.
Loans that you have applied for in the last five years are listed as enquiries.
Loans or accounts where you are more than 60 days overdue are listed as defaults.
Court judgements & Court writs.
Bankruptcy history (including Part IX history).
How can I get a copy of my credit file?
There are two ways for you to get a copy of your credit file. Which method you use will purely
depend on how urgently you need a copy. You can choose to do one of the following:
Write to Veda Advantage: You will get a free copy within 14 days.
Apply on Veda’s website: You will get it right away, although you will pay a fee.
At Loan Wize, we understand that there is no one size fits all home loan, and that everybody’s needs
are as unique and as individual as they are. We listen to you and tailor our recommended solutions to
your individual circumstances. So call and discuss your situation with a Loan Wize Professional
Lending Specialist today!