How Is Credit Score Calculated?

Your credit score is calculated by Equifax based on the information filed in your credit report at a specific point in time. There are several important contributing factors that are considered in calculating your credit score. This includes the type of credit provider, the type and size of credit requested in your application, the number of credit enquiries and shopping patterns, directorship and proprietorship information, age of credit report, pattern of credit enquiries over time, personal details, late payments, court writs and default judgements, bankruptcy or part 9 or 10 history and more.

  • Below 509 (Below Average)
  • 510 to 621 (Average)
  • 622 to 725 (Good)
  • 726 to 832 (Very Good)
  • 833 to 1200 (Excellent)

To learn more about how Equifax calculates your credit score, you can visit the company’s official website.

Can you buy a house with adverse credit?

The chances of getting approval on your mortgage application with a score above 600 are high. But can you still get a home loan if your credit score is below 500? Yes, lenders like Non Conforming Loans cater to borrowers that can’t get approval from mainstream lenders because of their bad credit scores.

Non Conforming Loans offer what is known as bad credit home loans to high-risk borrowers with low credit scores or adverse credit impairments. Bad credit home loans are similar to regular home loans, but with much higher interest rates and less choice home loan options. These limitations are due to the risk associated with lending to people with low credit scores which are perceived as greater for the lender.

A bad credit home loan can be refinanced to a prime bank loan once your credit file is clear.

How long does information stay on my credit file?

  • Repayment history – Up to 2 years

Your repayment history shows whether you have made your payments on time each month for credit accounts and products.

  • Enquiries – 5 years

When you apply for a credit product, a credit enquiry is recorded on your credit file by the credit provider.

  • Paid and Upaid Defaults and Judgements– 5 Years

A default is recorded on your credit file if your payment of $150 or more is overdue by 60 days or more.

  • Bankruptcies or Part 9 or 10 – 5 years

Credit files and reports will include publicly available information about personal insolvency, including bankruptcies.  These will stay on your credit report for at least 5 years and sometimes longer, up to 7 years for a serious credit infringements.

Is there a guaranteed home loan approval with a Bad Credit Lender?

No, Bad credit lenders still have their own internal guidelines regarding which loan application they approve, which often depends on a variety of factors depending on whether defaults are paid or unpaid or the dates that these were listed. It may be best to use the services of an experienced  mortgage broker in such a scenario, as they can suggest which bad credit funder is likely to have a home loan product that suits your needs.

Applying with a lender directly and getting rejected will negatively impact your credit score further because each application submitted will reflect on your credit file.