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Check Your Credit Score and Borrow More - Part 6

Heidi Armstrong explains everything about your credit file and how it affects how much your lender will lend to you when shopping for a home loan.

By understanding how your credit file is created and updated, you can make sure you keep it looking good. Heidi also explains how a lender calculates your borrowing power.

The live session is divided into 11 videos, packed with information you need before applying for a home loan in Australia.

Video transcript below:

Part 6 of 11
Check your credit score and borrow more
Heidi Armstrong, Director of Operations, State Custodians
In Australia we have what’s said to be known as a negative credit reporting system.  So with a credit reporting system that’s negative you could be the model borrower and unfortunately that doesn’t get reported.  
What gets reported are all the things that you may have done wrong.  The issues of non-disclosure.  Non-disclosure is a really big thing in the industry now.  When you go to apply for a loan and you are filling out your assets and liabilities, you think really hard about everything because lenders have a way of cross checking to see if you actually have disclosed all of your liabilities.
Credit reports, I actually, as I’ve said it’s loan application history.  So on your credit file, we can see what you have applied for.  We can’t see whether you have taken it up or not.  So very often you will apply for a loan and the lender might say look, “look Julie we noticed that, you know back in 2007 you applied for a loan with [Bank West] for 200,000 and Commonwealth Bank for 350,000 you know what happened to those?”  And you say, “Oh I didn’t take them up.”  
If the lender is a little bit soft on it or they do audit checks, they have the authority to go and talk to that other credit provider, talk to that bank and confirm the details.  So you do need to know that when you are filling out your loan application, store cards are a real classic that people just don’t think about.  They don’t realise that they have you know a David Jones card that actually is like a credit card.  
The other thing is employment information and disclosure.  That’s another classic one.  You know the amount of times say people write and say they are payg, but they are actually self employed, just giving themselves a pay slip.  Their credit report tells us that.  
You should check your own credit file at least once a year we think.  I believe it doesn’t cost you anything, if you are prepared to wait.  If you want it same day it’s about $41 and for about $51 they offer an excellent service, where they will send you an e-mail whenever somebody has done a hit on your credit report.  
So it just means that, you know it’s not out there somewhere and you don’t know what’s happening, you are alerted to any changes to your credit report.  If there is a mistake, then you contact VEDA and let them know.  VEDA will probably tell you to go and contact whoever has listed the default and work it out with them and if you have difficulties you can always go to the Financial Ombudsman, Telecommunications Ombudsman or the Credit ombudsman service and Federal Privacy Commissioner.
The state of your credit report is really the single biggest influence on your borrowing power.  Because if you have a bad one, it just doesn’t go anywhere.  It just gets declined, but if you have a good credit file then further assessment and serviceability is done.  And if now I want to look at what are those policies that underlie how much we are going to lend you.  We have checked out your credit report, we are happy with it, now how much are we going to lend you?

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