As a mortgage broker at Sri Finance, I’ve helped numerous Australians secure home loans. With the Reserve Bank of Australia (RBA) cutting the cash rate to 3.85% on May 20, 2025, home loan interest rates may ease, making now a good time to apply—if you have the right credit score. This guide explains the credit score you need for home loan approval in Australia and how to improve your chances, tailored for publication on www.srifinance.com.au at 11:49 PM AEST on Monday, June 23, 2025.
What Credit Score Do You Need?
In Australia, lenders typically require a credit score of 620-700 for home loan approval, though this varies by lender and loan type. Scores are calculated by credit bureaus like Equifax, Experian, and Illion, ranging from 0 to 1,200. A score of 750 or higher is considered excellent, offering the best interest rates and terms. Here’s a breakdown:
- 620-699: Minimum for most conventional loans; may require a larger deposit or higher interest rates.
- 700-749: Good range, improving approval odds and loan conditions.
- 750+: Excellent, unlocking the lowest rates and flexible options like jumbo loans for high-value properties.
Government-backed loans, such as those insured by the National Housing Finance and Investment Corporation (NHFIC), may accept scores as low as 580 with a 10% deposit, though lender overlays often raise this to 620.
Factors Beyond Credit Score
Your credit score isn’t the only factor. Lenders assess:
- Debt-to-Income Ratio (DTI): Keep DTI below 40% to show affordability.
- Stable Income: Salaried individuals or self-employed with consistent income (proven via tax returns) are preferred.
- Deposit Size: A 20% deposit avoids Lenders Mortgage Insurance (LMI), strengthening your application.
Improving Your Credit Score
If your score is below 620, take these steps:
- Pay bills and credit card balances on time.
- Reduce credit card debt to lower your credit utilisation (aim for under 30%).
- Avoid multiple loan applications to prevent hard inquiries from dropping your score.
- Check your credit report for errors via Equifax.
Why Wait for Rate Cuts?
The RBA rate cut signals potential EMI reductions. However, banks may delay passing on benefits, so a strong credit score now gives you a competitive edge. At Sri Finance, we can guide you through the process and find lenders matching your score.
Conclusion
A credit score of 650-700 is a safe target for home loan approval in Australia, with 750+ offering the best deals. Focus on stable income, a solid deposit, and credit improvement. Contact SriFinance for expert advice to secure your home loan today.
