Migrate to Australia: accessing loans and credit

29 September 2016 by News Desk   |   SHARE  

Migrate to Australia where your overseas credit history does not apply so you’ll have to create a new credit score.

Migrate to Australia where every bank has a different process for assessing your loan or mortgage application.

This is your credit score, which is different from your credit file.

Your credit score is a ranking applied to you by a lender. It is based on a range of factors unique to the lender and it will determine the types of clients they will lend to.

Your credit file is a long term record of your financial behaviour that banks can access to help them calculate your credit score.

Have you ever defaulted on a home loan repayment or electricity bill; bought new furniture on interest-free terms; applied for a loan or any other finance? All of this will be on your credit file

How your credit score is assessed could mean the difference between application approval and decline; and it will also determine how much money you can borrow when you migrate to Australia.

Factors lenders consider in order to assess your credit score include: Your age * Drivers’ licence * Home phone number.

Other factors include: The Number of credit enquiries on your credit file (such as home loan applications that were rejected or approved but not used; as well as purchases on interest-free terms, such as new furniture)

Defaults on your credit file (gas, electricity, council rates, mortgage repayments)

Employment – lenders will look at your type of employment (part-time, casual, self-employed, contract or full-time); the industry you work in; and how long you’ve worked for your current employer. If you are full-time in a relatively stable industry and you don’t change jobs every two years, you will score higher than someone who is part-time or has changed jobs frequently

Savings history – lenders will consider how much you’ve saved and over what timeframe. Your ability to save indicates your ability to repay a loan

Other assets – includes cars, furnishings, shares etc. A strong asset base, like a strong savings history, shows you’re not wasting your income and you’re motivated to build wealth

Loan to valuation ratio (LVR) – the lower your LVR, the better your credit score. This ties in to your savings history – the larger your deposit the better

Residential history – lenders want to know whether you’re still living at home, boarding, renting, living in your own property etc. How long you’ve lived there is also an important indicator of stability

Migrate to Australia: accessing loans and credit

There are many key differences between lenders in how they calculate your credit score.

Part of your credit score relates to ‘serviceability’ – that is, your ability to make your repayments. This, in addition to your equity in other assets, will determine how much you can borrow.

Examples of differences in how lenders assess your income (or ‘serviceability’)

Rental income – lenders will use 60 percent-80 percent of your rental income. Some lenders will use rental income as determined by a valuation, others will use actual rent receipts

Other mortgage debts – most lenders now apply the benchmark rate to other existing debts, so a rate of 7.5 percent is applied to existing mortgages rather than the 4-5% you’re actually paying now

Credit card debt – lenders will use 2.5 percent-3 percent of your credit limit (not the outstanding balance) to calculate a monthly repayment
Other expenses – any regular ongoing expenses will factor into your serviceability

Bonus Income – lenders will use 80 percent-100 percent of any bonus income
Commission income – lenders will use 80 percent-100 percent of any commission income

Industry allowances – some lenders won’t include allowances at all, others will use 80-100 percent of shift allowances or tool allowances when calculating income

Overtime – lenders will generally use 80 percent of overtime income

Want to Migrate to Australia? Click here for expert help: Skilled Migration to Australia

Want to get a job Down Under? Click here for expert help: How to Get a Job in Australia

Click here for expert help with travel visas: Travel Visas to Australia

Click here for expert help with Study Visas: Student Visas in Australia

Click here for tourist information about Australia: Visit Australia