How to improve your credit score before a home loan: where to start

Before you pay for credit repair or try another home loan application, get the reports behind your score. An error, an overdue account and income that won't cover the loan need different responses.

Those steps can improve your position, but nobody can promise a set point increase or a date when you'll qualify for a home loan.

A good score doesn't replace the bank's checks on income, spending, debts, deposit and the property.

Use this order before another application:

1. Get both reports and check the accounts, limits, repayments and enquiries.
2. Dispute errors using the free process.
3. Bring repayments up to date and get help with any money problem.
4. Review the household budget and proposed borrowing with your broker.
5. Apply when the relevant issues are understood, rather than testing your chances with another enquiry.

You can request a free consumer credit report from Equifax and Experian every 3 months.

They can hold different information, so check both.

Check personal details, accounts, limits, repayment history and enquiries. Is there an account you don't recognise?

Does a closed card still appear open? Keep the whole report so you and your broker can check the entries, not just a screenshot of the score.

The score summarises report information. Reporting bodies use different scoring systems, and lenders make their own assessment. A number without the entries behind it doesn't explain what needs attention.

Contact the credit provider or a credit reporting body, name the entry and send proof. Keep the reference number and every email or letter.

Corrections are free. If the organisation is satisfied the information is incorrect, it must take reasonable steps to correct it within 30 days.

You can agree to a longer period. Get another report afterwards to check the result.

Be wary of anyone promising to remove accurate negative information or guarantee loan approval. You don't need to pay a business to use the correction process.

One buyer came to us with a default on their credit file. We initially discussed specialist lending as a possible fallback while the default remained.

After the client and credit-correction service confirmed its removal, we continued working through the deposit and borrowing requirements. Their home loan subsequently settled with a major bank.

That’s why we check the credit-file issue before assuming specialist or non-bank lending is the only option. The lender still had to assess the full application.

This is a real client example with identifying details omitted. It does not establish why the listing was removed, promise a particular score increase or mean another borrower will qualify. Accurate negative information cannot simply be erased for a fee.

Separate from this client’s case, a listing may need correction if a debt is duplicated, the amount is wrong or the required notification process was not followed. A default listed while a debt was in dispute may also be a reporting error.

These are reasons to investigate, not a promise of removal. You can request a correction free through the credit provider or reporting body. We have not established that a notice problem caused the removal in the client example above.

Some borrowers choose paid help to handle a credit-report dispute. Before signing, check the provider's credit licence on ASIC's register, read the fees and cancellation terms, and ask exactly what work they will do. Paying does not guarantee a correction, a higher score or a home loan.

Start with the free correction process above. If you cannot resolve the complaint, AFCA offers free independent dispute resolution for complaints within its scope. A free financial counsellor can also help. We are not recommending a particular credit-repair business.

Set reminders or direct debits for amounts you can afford, and leave enough in the account to cover them. Check due dates when your pay cycle changes. Keep contact details current so a missed notice doesn't become another problem.

If you're struggling, speak to the provider early. An agreed hardship arrangement isn't the same as ignoring a bill. Don't rely on a future mortgage approval to fix an unpaid account.

A credit reporting body can't use financial hardship information to calculate your score. That doesn't stop a lender assessing your current finances.

For a temporary arrangement, hardship markers are removed one year after the final repayment under the arrangement. For a permanent variation, the marker is removed one year after it starts.

Compare products and check eligibility before authorising a formal application. A run of credit enquiries can raise questions about your finances, including applications for cards, personal loans and buy now, pay later arrangements. Ask whether a proposed check will record an enquiry.

You don't need a new credit card purely to build borrowing history for a mortgage. Review unused limits with your broker instead.

Reducing a limit can change the bank's borrowing-capacity calculation without producing a predictable score increase. Affordability and credit scoring aren't the same calculation.

If a lender has declined you, ask why. A wrong entry needs correction.

Income that doesn't cover the requested loan needs a different response. Another application without fixing the cause can repeat the same problem.

This applies when you're comparing first home buyer loans and when you're planning to refinance. The lender still decides whether to lend.

Correcting an error is different from building a stronger recent payment record. The time needed depends on what's on your report and what the lender requires.

Repayment history stays on your report for 2 years, and defaults and credit enquiries for 5 years. A default is a listed overdue debt.

Paying a correctly listed default updates its status but doesn't automatically remove it. These are reporting periods, not compulsory waiting periods for every home loan.

For example, a hypothetical buyer finds a closed account shown as open and an accurate paid default. They ask for the account status to be corrected and keep proof the default was paid.

They also put off a new furniture-finance application while their broker checks the mortgage options.

Bring both full credit reports, any decline explanation, proof that disputed or overdue accounts have been corrected or paid, and a current list of debts and limits.

Include your income, regular spending and deposit figures so the conversation covers affordability as well as the score.

We look at the entries behind the score and the proposed loan together. If an error needs fixing or the budget cannot support the borrowing, another application is not the first step. Ask which issue needs resolving and what evidence would show the change.