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Buying a first home can feel exciting and overwhelming at the same time.
One of the most common questions that we get at IMB Bank from people looking to buy their first home is whether their credit score – also known as a credit rating in Australia – is strong enough to apply for a loan. While there isn’t one answer that applies to everyone, credit scores often play a role in how lenders assess applications, the types of loans available, and the rates on offer.
The good news?
Even if your score isn’t where you’d like it to be, there are often steps you can take to improve it. With the right preparation, you may also be able to access first home buyer grants or concessions to help make the process easier.
Why Does My Credit Score Matter?
When applying for a home loan, lenders consider a range of factors, including income, expenses, savings, and employment history in assessing the applicant’s suitability. A credit score is often part of that picture. It reflects past financial behaviour, from how you manage your debt to how many credit applications you have made.
A stronger score can sometimes mean access to more loan options, potentially at lower rates. A lower score might make borrowing more challenging, though this doesn’t necessarily rule out the possibility of being approved. Instead, it may simply mean that additional preparation or guidance is needed. It’s usually determined on a case-by-case basis by the bank providing your loan.
Is There a Minimum Credit Score for a First Home Buyer?
There isn’t a universal minimum credit score that guarantees approval for a loan. That includes if you are purchasing your first home.
This is because each lender has different policies and criteria that they adhere to.
For first home buyers, even modest improvements in a credit score may open up new opportunities. This is why many people focus on their credit health well before starting a loan application.
How Can I Improve My Credit Score?
For anyone concerned about their score, small changes can sometimes make a noticeable difference over time.
We’d first recommend that you simply check your credit score. This is to indentify any potential errors that can occasionally appear, as correcting them may improve your rating without you having to do much at all.
There are many ways to actively build a better credit score. For example, having a history of on-time payments, or keeping credit card balances low relative to their limits can support a stronger profile.
Another example is avoiding multiple new credit applications in a short period of time. For those with past financial difficulties, gradually addressing outstanding debts or negotiating repayment plans may help demonstrate reliability.
We should say that credit repair is rarely instant. Some people notice changes within a few months, while for others it may take longer.
How Much Could I Afford as a First Home Buyer?
Along with credit scores, lenders usually look closely at borrowing capacity. There are a lot of factors that are considered when assessing borrowing capacity, particularly when the buyer is a first-time buyer. It may involve weighing up income, existing expenses, and the size of the deposit.
There are ways to potentially strengthen your application, like having savings and a consistent employment record. A larger deposit may also reduce the need for Lenders Mortgage Insurance, which can otherwise add to the overall cost.
Purchasing a first home is not always straightforward, particularly if credit history is a concern. Still, many buyers find that by planning ahead and improving their score where possible, their credit score can become an asset in their home buying journey.
At IMB Bank, we’ve supported many Australians as they take steps toward buying their first home. Whether you’re still building your financial profile or beginning the loan application process, speaking with a lending specialist may help you understand your options and prepare with more confidence.
