Article· Buying
What Is a Credit Score?
7 Feb 2026 · 2 min read
Understanding how credit scoring works can protect your credit file when applying for a home loan.
You have probably heard the term 'credit score' thrown around, or had a lender say a loan was declined due to credit scoring. So what is a credit score, and how does it affect a home loan application?
A credit score is a computer-generated algorithm that assesses the risk level of an application. Put bluntly, 'computer says no' – though often it says yes, the automated risk assessment dictates the outcome.
Both banks and mortgage insurers use credit scoring. When an application is submitted, the data is collated and run through an automated scoring system.
While banks do not disclose their exact criteria, scoring systems may evaluate job stability over recent years, age, family status, residential history, asset and liability positions, and even contact details. Applications have occasionally been declined where providing a home phone number was the only detail needed to secure an approval.
While landlines are less common today, this demonstrates how detailed risk assessments can be.
Another key factor is the credit file. Whenever an enquiry for finance is made, it is logged on the credit file—even if no loan is taken out, and sometimes when simply asking a lender basic questions about borrowing capacity.
Problems can arise when shopping around from lender to lender to compare rates or seek pre-approvals. The first few lenders may approve an application, but then declines can follow. This often points to an overactive credit file, as multiple enquiries alone can negatively impact a scoring result.
It pays to be cautious when shopping around. Providing personal information to a bank often results in a credit check. A mortgage broker operates differently and typically does not perform a credit check unless necessary; even then, the check may not leave a loan enquiry footprint on the credit file.
Working with a broker allows access to a range of suitable lenders while helping keep the credit file clear of unnecessary enquiry footprints. A review of a credit file can clarify how scoring impacts home loan options.
