Home Loan Scoring System & Loan Situation

[NickyG]

Hi there,

I'm trying to get finance for a block of land ($134,000). I've got pre approval from the mortgage broker however I got knocked back by Commonwealth on the grounds that I was deemed high risk.

I'm in my first full time position as a Graduate Civil Engineer at a local council which I started in May this year. I take home minimum 1700 (after tax) a fortnight from that job while also working Saturdays at a retail store in which I have been working for 4 years at casually. So my total per fortnight is around 1850 after tax.
I save around 1300 a fortnight which goes into my house savings account.

What specifics do they look at when determining your score? The mortgage broker is now trying Westpac as they have a different scoring system to Commonwealth. But I'd like to know more on what is getting me declined.

In my work position I use scoring systems and I understand that scoring systems are a good tool to provide consistency amongst applications while taking into account various attributes such as duration of occupation, loan amount, savings history etc. As i use similar tools when determining the priority of future works.

The loan amount is $127,000 which is a small amount in the scheme of bank lending and $170 odd in weekly repayments is tiny for myself considering my outgoings are less than $200 a week including all bills.

Also I've got to get finance approval by the 16th August for settlement on the 20th September.

What are your thoughts on both the scoring system used by banks such as Commonwealth and thoughts on my predicament.

 

[Shahin_Afarin]

Westpac also credit scores. Maybe worthwhile going with a lender that doesn't credit however you are right - you need to find out why your application has been declined.

Lenders look at but not limited to:

1. Employment stability (duration, how often you are changing, same industry or different industry/line of work)

2. Address stability (are you changing addresses regularly)

3. Additional information (you need to ensure that all of the information has been entered - a simple landline number could mean the difference between approval or decline or entering your deposit as cash rather than savings).

4. Credit history and the number of credit enquiries on your file for the last 12, 6 and 3 months.

5. Level and amount of unsecured lending (secured ok but unsecured is a big no no).

6. Level and amount of Assets

All of the above is then weighed up against the LVR - the higher the LVR the more conservative the credit scoring.

You need to be 100% confident before applying again. The last you want to do is kill your credit file (point 4).

 

[Peter_Tersteeg]

There's no definitive answer to how lenders credit score, even their own staff don't have the answers. The people who determine these metrics don't actually disclose this information.

The previous post has indicated what some of the obvious metrics are. Given what you've described it's probably a combination of your employment duration, your address stability, the LVR you're after and the location you're purchasing in. No one of these things would eliminate you on its own, but combined they may mean you're a high risk.

We occasionally get an application declined due to credit scoring, the first thing we do is fairly obvious. We call our contacts at the lender and ask them to review the application. Quite often they can look at it and actually identify the major risk factors in the application. This may not change that lenders decision, but it does mean we're better informed for the next application.

Often the next step is equally obvious. We take the application to a lender that doesn't credit score. I think your broker taking the loan to Westpac is a mistake as there's a very high chance it'll end up with the same result. You're more likely to be successful if you submit to a lender that doesn't credit score at all. The rate might be marginally higher, but that's better than having multiple declines which could eliminate you completely.

 

[NickyG]

Westpac also credit scores. Maybe worthwhile going with a lender that doesn't credit however you are right - you need to find out why your application has been declined.

Lenders look at but not limited to:

1. Employment stability (duration, how often you are changing, same industry or different industry/line of work)

2. Address stability (are you changing addresses regularly)

3. Additional information (you need to ensure that all of the information has been entered - a simple landline number could mean the difference between approval or decline or entering your deposit as cash rather than savings).

4. Credit history and the number of credit enquiries on your file for the last 12, 6 and 3 months.

5. Level and amount of unsecured lending (secured ok but unsecured is a big no no).

6. Level and amount of Assets

All of the above is then weighed up against the LVR - the higher the LVR the more conservative the credit scoring.

You need to be 100% confident before applying again. The last you want to do is kill your credit file (point 4).

In reply to your points I'll give the following information to firm up my situation.

1. I started working in retail casually at 16, have been at 2 different companies since then, 4 years at Kmart Australia and 3 years and counting at a local Surf Shop.I started my first full time job as a Graduate Civil engineer in May 2013.

2. Lived at current address with parents for 8 years or so now.

3. I'll make sure these details are also entered.

4. Only had the 1 application at Commonwealth

5. I believe it is secured with land as collateral.

6. My only real assets apart from the land I would be purchasing is my car (brought from savings at $18,000)

I believe the max LVR was 95%

The broker mentioned on the phone that he may go to Westpac although as he hadn't looked into it fully yet. I'll bring up the points discussed with him tomorrow to clarify all the right information is given and if we can get a response from commonwealth

 

[Shahin_Afarin]

Ok so off the bat I (credit scoring) have an issue with your employment at LVR. You haven't been in the current role for a long time and you haven't been in that industry for a long time.

Address is excellent and not an issue.

Have you applied for any credit cards, interest free stuff from harvey norman, etc? Are you sure the CBA application is the only thing?

What about Super? What about Home and Contents?

 

[NickyG]

Ok so off the bat I (credit scoring) have an issue with your employment at LVR. You haven't been in the current role for a long time and you haven't been in that industry for a long time.

Address is excellent and not an issue.

Have you applied for any credit cards, interest free stuff from harvey norman, etc? Are you sure the CBA application is the only thing?

What about Super? What about Home and Contents?

Thanks for the reply..

No credit cards, The only card I have of the credit type is a ANZ Access Visa Debit Card (not sure if that counts). No other applications have been made nor have any interest free stuff from anywhere. I brought my car with Cash however did talk about getting finance but an application was never put in.

Not sure what you mean in terms of Superannuation? At this stage we are borrowing for the Land. At my current address the home is fully owned by my parents (I have no share nor pay no rent)

 

[Corey Batt]

I'd take a punt and say that length of employment is tanking your app. Were you employed prior to your grad position?

If you were employed before, make sure this is disclosed, as well as little info such as home ph numbers which can all push credit scoring higher. Every little trigger can push you higher, as absurd as it is.

 

[NickyG]

I'd take a punt and say that length of employment is tanking your app. Were you employed prior to your grad position?

If you were employed before, make sure this is disclosed, as well as little info such as home ph numbers which can all push credit scoring higher. Every little trigger can push you higher, as absurd as it is.

Yes I was employed as a casual at a Surf Store however the grad position is my first full time position. I'll talk to my broker tomorrow to ensure all this is added.

 

[Shahin_Afarin]

Ok based on the information you have provided I would definitely recommend against going to Westpac. You need to go with a lender that doesn't credit score and will assess the application on its merits. Having said that you really need to mitigate the employment "issue".

Superannuation is an asset and a lot of people dont include this in the application. Again you need to provide every single possible information no matter how trivial you may think it is.

 

[Aaron_C]

NickyG - STOP. Do not go Westpac!!!! Were you an existing customer of CBA? Customer of Westpac? If CBA rejected you and you are an existing customer, then there is no chance that Westpac will approve a same application.

 

[Corey Batt]

Yes I was employed as a casual at a Surf Store however the grad position is my first full time position. I'll talk to my broker tomorrow to ensure all this is added.

Definitely make sure this is added. Casual or no, long history of employment is a GOOD thing.

 

[NickyG]

NickyG - STOP. Do not go Westpac!!!! Were you an existing customer of CBA? Customer of Westpac? If CBA rejected you and you are an existing customer, then there is no chance that Westpac will approve a same application.

Ok thanks for the advice I will make sure that no application is sent to Westpac (they need me to sign something first before they can send the application right?). I have accounts with ANZ only. How does one mitigate the employment "issue"?

 

[Aaron_C]

If you are an existing customer of ANZ then ANZ should have been the lender to go with. ANZ policy will allow your relatively short new job. Why CBA in the first place? Bad mistake.

 

[NickyG]

If you are an existing customer of ANZ then ANZ should have been the lender to go with. ANZ policy will allow your relatively short new job. Why CBA in the first place? Bad mistake.

Originally CBA was the first choice based on the interest rate etc of the loan. I took my brokers advice on this one. ANZ's interest rate was a little higher I believe. But I'm relatively new to this.

Why would CBA be a bad mistake apart from the obvious of being denied.

 

[Shahin_Afarin]

Mitigate the employment issues by providing a background - you need to be upfront with the information rather than having the credit assessor call the broker and query the employment or worse decline the application due to the lack of information.

 

[NickyG]

Mitigate the employment issues by providing a background - you need to be upfront with the information rather than having the credit assessor call the broker and query the employment or worse decline the application due to the lack of information.

If the new information was given is there a chance the denied application can be approved or is is game over for CBA?

 

[Aaron_C]

Why would CBA be a bad mistake apart from the obvious of being denied.

On a non-existing customer at a 95% you would be ranked a 4 or 5, which is dead. As an existing customer a score would automatically go to a 2-3 which means good.

 

[Shahin_Afarin]

It is extremely difficult to overturn an application that has been auto declined without a legitimate reason/explanation and to be honest you don't have a case here. However the Broker should contact CBA and ascertain the reason/s why the application was declined. I have only zero'ed in on the employment - there may be other factors which you should look at.

 

[NickyG]

It is extremely difficult to overturn an application that has been auto declined without a legitimate reason/explanation and to be honest you don't have a case here. However the Broker should contact CBA and ascertain the reason/s why the application was declined. I have only zero'ed in on the employment - there may be other factors which you should look at.

Ok thank you all very much for your help. So based off the information I have provided you. Do you believe it is best to go with ANZ (My current bank) or search for a bank that doesn't use the scoring. Taking into account not only the chances of approval but the interest rate etc with the loan.

 

[Aaron_C]

Nicky who cares about the rate if you can't even get the loan?