What Happens to Your Credit Score During a Home Loan App?

Quick Answer: Applying for a home loan creates a hard enquiry on your credit file — typically reducing your score by 5–15 points per application. Multiple applications to different lenders in a short period create an enquiry cluster that compounds the score reduction to 50–150+ points. A pre-approval is a formal application and also creates a hard enquiry. The enquiry stays on your credit file for 5 years under the Privacy Act 1988. If your credit file has existing negative entries — defaults, excess enquiries from previous applications, incorrect listings — these should be assessed and where possible resolved before submitting a home loan application. Australian Credit Solutions provides free credit file reviews for Australians preparing to buy. 98% success rate on accepted cases. No Win No Fee. ASIC ACL 532003. Industry Excellence Award 2022, 2023 & 2024. 4.9/5 from 976+ reviews.

Buying a home is one of the biggest financial decisions of your life. Most Australians don't fully understand what happens to their credit file during the process — and the mistakes made during a home loan search can affect your score for years.

What a Lender Sees When You Apply

When you apply for a home loan, the lender accesses your complete credit file from one or more of the three bureaus (Equifax, Experian, Illion). They see:

They do not see: your income, your savings balance, your assets, your employment history (this comes from your application and supporting documents, not the credit file).

The Enquiry Problem: How a Home Loan Search Damages Your Score

Every home loan application creates a hard enquiry. Every pre-approval creates a hard enquiry. Every lender submission via broker creates a hard enquiry.

The maths gets ugly fast:

The scoring model reads clusters of enquiries as financial stress signals — "this person has been declined multiple times and is desperately seeking credit." Multiple declines in a home loan search create the worst possible signal for subsequent lenders.

Pre-Approval: Does It Affect Your Credit Score?

Yes. A formal pre-approval from a bank is a credit assessment — not an estimate. It requires the lender to formally access your credit file, creating a hard enquiry.

Conditional assessment tools (not pre-approvals) offered by some banks use soft enquiries and don't affect your score. CBA's NetBank Borrowing Power tool, for example, uses a soft check. Ask specifically whether the tool you're using creates a hard enquiry before proceeding.

If a broker or lender offers a "free property search" or "pre-qualification" — ask in writing: will this create a hard enquiry on my credit file? If yes, treat it as a formal application in terms of score impact.

How to Protect Your Credit Score During a Home Loan Search

Before you start:

1. Pull all three credit bureau reports (Equifax, Experian, Illion — all free) and review them yourself
2. If you find any defaults, incorrect entries, or excessive enquiries — address them before applying
3. Know your actual score at each bureau before any lender sees it

During the search:

1. Don't apply to multiple lenders yourself — use a broker who will submit only after you've selected your preferred lender
2. Tell your broker explicitly: "Do not submit to any lender without my written consent for each submission"
3. Space applications at least 30 days apart if you need to try multiple lenders
4. Don't sign up for new credit cards, car loans, or BNPL in the 6 months before applying

If declined:

1. Ask the lender for the reason — get it in writing
2. Do not immediately apply elsewhere — address the underlying issue first
3. Get your credit file reviewed by a professional before the next attempt

Credit Score Thresholds: What Lenders Actually Need

Different lenders have different minimum score requirements. These aren't publicly published but are well understood in the industry:

Your credit score is one factor — lenders also weigh income, employment stability, deposit size, existing debts, and the property itself. A 720 score with high debt-to-income ratio may be harder to approve than a 650 score with strong income and minimal existing debt.

Case Study: Aaron, Melbourne — 6 Enquiries Before He Understood the Problem

Aaron, 36, a project manager from Essendon, had been trying to buy his first home for 18 months. He'd applied directly to three banks (declined twice, approved at higher rate once), used two different mortgage brokers (each submitted to two lenders), and done a pre-approval. Result: 7 hard enquiries in 18 months. His Equifax score had fallen from 681 to 541.

By the time he reached Australian Credit Solutions, the enquiry cluster itself had become the problem — not any underlying default or negative listing. His file was otherwise clean.

We identified that one enquiry was a broker duplicate (same lender accessed twice from two different broker submissions on the same day), and one early direct bank enquiry had an incorrect date that placed it outside the consent period Aaron had authorised. Both were disputed under the Privacy Act 1988 and removed. Score recovered from 541 to 601 within 6 weeks. Combined with a 4-month application pause, Aaron's next broker submission — to a single pre-agreed lender — was approved at a competitive rate.

Aaron paid nothing until we succeeded.

Get a free assessment from Australian Credit Solutions →

What to Fix Before Applying for a Home Loan

If your credit file isn't in the best shape, these are the issues to address — in order of score impact:

1. Formal defaults — biggest single score impact; get professional assessment on removal grounds before applying
2. Enquiry clusters — review all enquiries, identify any that were unauthorised or duplicated, dispute before submitting new application
3. Late payment markers — if within the 2-year CCR window; dispute any that were incorrectly recorded
4. High credit card utilisation — reduce limits and/or balances before application to improve serviceability and score
5. Expired entries — check all entries are within their legal retention periods; demand removal of anything past 5 years

Australian Credit Solutions offers free credit file reviews specifically for Australians preparing to apply for a home loan. We tell you honestly what's removable, what we can't help with, and what timelines to expect.

Frequently Asked Questions

Does applying for a home loan affect your credit score in Australia? Yes — every home loan application creates a hard enquiry on your credit file that reduces your score by approximately 5–15 points and remains visible for 5 years under the Privacy Act 1988. Multiple applications to different lenders create enquiry clusters that cause significantly more damage — 50–150+ points across 4–6 enquiries. A single carefully planned application to a well-matched lender causes the least credit score damage. For more, see our guide on credit score needed for a home loan in australia.

How many points does a home loan application take off your credit score? A single home loan application typically reduces an Equifax score by 5–15 points. Two applications in 3 months: approximately 20–40 points. Four applications: 50–100 points. Six or more applications: 100–200+ points. The compounding effect is disproportionate — each enquiry signals increased risk to the next lender who reviews the file. For more, see our guide on credit score needed for a home loan in australia.

Does a home loan pre-approval affect credit score? Yes — a formal pre-approval from a bank requires a credit check that creates a hard enquiry on your file. This is different from a borrowing power estimate or pre-qualification tool, which some lenders offer using soft enquiries (no score impact). Always confirm in writing whether any assessment creates a hard enquiry before consenting.

Should I fix my credit before applying for a home loan? Yes — if you have any defaults, excessive enquiries, or incorrect entries on your file, addressing these before applying is strongly advisable. A removed default can improve your score by 100–200 points, potentially moving you from specialist lender territory (high rates) to standard bank lending (competitive rates). Australian Credit Solutions provides free file reviews for home loan applicants.

Can a mortgage broker's enquiry damage my credit score? Yes — when a broker submits your application to a lender, that lender runs a hard credit check creating an enquiry. If the broker submits to 4 lenders simultaneously, that's 4 enquiries in one day. Require your broker to get your written consent for each specific lender submission before it happens, and confirm how many lenders they plan to approach.

How long does a home loan enquiry stay on credit file? A home loan application enquiry stays on your credit file for 5 years from the date of the credit check under the Privacy Act 1988. This applies whether the application was approved, declined, or withdrawn. The score impact diminishes over time — most significant in the first 12 months, gradually reducing through years 2–5.

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Australian Credit Solutions Pty Ltd holds Australian Credit Licence ACL 532003. Credit repair services are subject to individual assessment. Results may vary. This article provides general information only and does not constitute legal or financial advice.

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