Finance

Big Bank vs Small Lender Mortgage: Everything You Need To Know

Are you struggling to decide whether you want to go to a big bank or a small lender to get your mortgage? We’d totally get why you’d think about just going to a big bank. There’s familiarity and some level of reliability that you might not be sure you’re getting with a small lender. 

That said, this process is more about finding someone who’s going to match your priorities – that could be:

• Getting a quality deal on interest rates
• Face-to-face service at a local branch
• Accessing more flexible lending criteria if your situation isn’t straightforward. 

Fortunately, both the traditional giants and fairly new small lenders have their place in the home loan market, so you’ve got good options either way. Here’s how to weigh them up and decide what works best for you:

An Overview of Australian Mortgage Lenders

Australia’s financial system relies on a mix of some of the major players you’ve undoubtedly heard of and a few smaller outfits. The “big four” banks dominate this scene, which includes:

• Commonwealth Bank
• ANZ
• Westpac
• NAB

These banks are overseen by the Australian Prudential Regulation Authority, and they hold the lion’s share of mortgages. As you might expect, they each have huge branch networks and polished digital platforms that are easy to use.

On the other hand, many non bank lenders tend to solely be home loan providers, whether they operate solely online or through a handful of branches. So not including personal loans. And then alongside them sit credit unions, building societies and challenger banks. 

These smaller financial institutions want to compete against those big banks generally speaking, and they do this through sharp rates and personal service as they hope to chip away at the big banks’ market share.

Why Borrowers Flock to Big Banks

Familiarity and Trust

As mentioned before, walking into a branch of a big bank brings instant recognition. You know the logo and the staff in branded uniforms. For a lot of people, that translates into peace of mind when dealing with substantial financial products like a mortgage. Crucially, you can rely on them.

Breadth of Services

Major banks often offer a full wheel of banking services that can be bundled with your loan (unlike with non bank loans), such as:

• Everyday bank accounts
• Offset accounts
• Credit cards
• Insurance

One login and one relationship can feel convenient if you prefer everything under one roof.

Regulatory Oversight and Stability

Under APRA’s watch, big banks must maintain strong capital buffers and strict lending practices in order to safeguard financial stability. That rigorous supervision is naturally going to reassure you as a customer that your lender is solid – even when markets wobble.

The Rise of Small Lenders

Competitive Interest Rates and Fees

Smaller lenders generally operate without massive branch networks, and they can pass on savings in the form of competitive interest rates. They often advertise lower ongoing fees and package costs. Over a 25-year loan, shaving just 0.3% off the rate can mean thousands of dollars in savings.

Personalised Service

With fewer customers per staff member, a boutique lender or local credit union may deliver a more tailored experience. You’re more likely to deal with the same contact throughout the application and settlement process – and they can sometimes approve applications faster.

More Flexible Lending Criteria

Traditional banks stick to strict checklists:

• Stable employment history
• Substantial deposit
• Spotless credit

Smaller lenders, on the other hand, often offer more flexible lending criteria. Self-employed borrowers, those with irregular income or minor past credit hiccups might find that they’re more likely to get a loan approved with a non-bank mortgage lender.

Comparing Interest Rates and Fees

Understanding the True Cost

It’s tempting to chase the lowest advertised rate, but you also need to factor in interest rates and fees, such as:

• Application fees
• Ongoing account fees
• Early repayment penalties
• Redraw charges
• General home buying costs

These can erode the benefit of a low headline rate, so you always want to compare the total cost over time.

Fixed vs Variable Options

Both big banks and small lenders provide a mix of fixed and variable rate options. Fixed-rate deals lock in your repayments for a set term, which offers some certainty if you prefer a stable budget. Variable rates, on the other hand, can adjust, giving you flexibility to make extra repayments or tap into an offset account linked to your home loan.

Loan Features That Matter

Offset and Redraw Facilities

An offset account effectively uses your savings to reduce interest on your home loan. Some big banks bundle this into premium packages, often with higher annual fees. Smaller lenders may offer standalone offset facilities without tying you to a broader banking relationship.

Refinancing and Switching

The general state of mortgage lenders changes quite quickly. Refinancing can be a powerful tool to capitalise on shifting interest rates. Smaller lenders sometimes run promotional offers exclusively for switchers, where they waive certain fees or offer cashback. Before you refinance, double-check any exit or application fees to ensure the switch genuinely saves you money.

Safety, Regulation, and Deposit Guarantees

Authorised Deposit-taking Institutions

Banks, credit unions and building societies are all grouped as ADIs. They all meet rigorous capital and liquidity requirements under the supervision of the Australian Prudential Regulation Authority (including an Australian credit licence). 

Government Deposit Guarantee

The federal government guarantees customer deposits up to $250,000 per person per ADI. This is a safety net that covers savings accounts but not mortgages – though as a borrower, your repayment obligations don’t just vanish if a small lender fails. Instead, your loan is typically sold to another institution, meaning you continue to repay under the same terms.

Tech and Transparency

Online Tools and Comparison Platforms

Nowadays, it’s fairly common for both big banks and smaller lenders to provide nice online portals where you can check your borrowing power in minutes. Some platforms even integrate third-party data, which lets you pre-fill forms with details from your savings accounts or credit files. 

Open Banking and Data Sharing

Under new regulations, consumers can authorise banks to share data with authorised third parties, including non-bank lenders. This means you could submit your transaction history directly to a smaller lender, which would massively speed up the assessment process and reduce all the issues you might face when it comes to documentation.

Finding the Right Balance

Your Personal Priorities

• If you crave one-stop banking, branch access and a full suite of financial products, a big bank might suit you best.
• Exploring smaller mortgage lenders can pay off if you’re hunting for the lowest possible interest rates and more of a personal touch.

Shopping Around Matters

Even if you lean toward a big bank, get a quote from a non-bank lender. Many customers report saving money and enjoying more responsive service by simply comparing offers side by side.

How Upscore Can Help

No matter which lender you choose, having your finances sorted makes the process smoother. Upscore’s Finance Passport gathers your verified financial details – income, expenses, assets and liabilities – into one secure profile. And it’s completely free!

Sign up for Upscore’s Finance Passport today!

What Is A Tracker Mortgage?

Ever heard the term “tracker mortgage” and wondered what it means? If you’re an Australian homebuyer or homeowner, you might not be too familiar with this concept, since local lenders do not commonly offset it. 

So in simple terms – what is a tracker mortgage? It’s a home loan with a variable interest rate that moves in line with a specific benchmark (which is usually an official cash rate that the central bank sets). 

But the main difference here is that, unlike a normal variable loan where the bank can change rates whenever, a tracker mortgage follows the official rate exactly. For instance, if interest rates rise, a tracker loan’s rate goes up by the same amount – and if interest rates fall, the loan’s rate drops equally.

How Tracker Mortgages Work

A tracker mortgage is essentially a loan where your interest rate “tracks” an external reference rate (like the Reserve Bank of Australia’s cash rate) with a fixed margin on top. So this just means that the rate on your loan will either rise or fall in sync with that benchmark. 

For example, Auswide Bank introduced a tracker home loan quite a while ago in 2016 that was set at 3.99% p.a., and it even had a floor – the rate couldn’t drop below a certain figure even if the RBA cash rate fell to zero. The big benefit of this setup is transparency: whenever the RBA makes a move, your mortgage rate adjusts in step automatically.

Tracker Mortgages in Australia vs. the UK

Tracker mortgages are popular in some other countries, especially the UK. In Britain, a tracker mortgage usually follows the Bank of England’s base rate (their equivalent of the RBA cash rate) plus a set margin. 

Most UK tracker deals tend to last only for a certain term (commonly two or five years), after which the mortgage interest rate switches to the lender’s standard variable rate (SVR). 

In Australia, by contrast, tracker mortgages have been almost unheard of. As of 2016, such products were not offered by any of the major banks here. A few smaller lenders have tried them – for instance, that previous example we just gave of Auswide Bank launching a tracker loan – but they’re still very niche. 

Big banks have argued that there isn’t much demand and that trackers could be risky or costly to offer (since the bank must pass on all rate cuts). And to compensate, lenders often set the margin higher on a tracker, so the tracker rate mortgage might not even always be the cheapest deal around.

Tracker vs. Standard Variable vs. Fixed Rates

How does a tracker mortgage compare to other home loan types that most Australians go for? 

Standard Variable Rate Loans

This is the most typical Aussie home loan. The interest rate can move up or down, but it’s set at the lender’s discretion. Standard variable rates usually just follow the RBA’s movements, but banks often pass on changes only partially (and sometimes make independent moves). 

So put simply, a standard variable loan gives the bank flexibility to set rates as it wishes, whereas a tracker guarantees your rate will mirror an external index exactly.

Fixed Rate Loans

A fixed rate mortgage locks in your interest rate for a set period (such as, 2, 3 or 5 years). During that time your rate won’t change – you’re shielded if rates rise, but you won’t benefit if rates fall. 

Fixed rate mortgage deals definitely give you the more stable repayment option of the two types of loans we’re talking about right now. The downside is that there’s less flexibility: exiting a fixed rate deal early usually incurs an early repayment charge (a penalty fee). 

Tracker loans, being variable, usually don’t have such penalties, but of course their rate can change at any time. Ultimately, choosing between a fixed or tracker comes down to whether you value stability or the chance to take advantage of rate drops. Or if you can even find a tracker loan in Australia.

Things to Watch Out For with Tracker Mortgages

If you’re considering a tracker mortgagee, keep a few caveats in mind. First, pay attention to the margin above the official rate – if it’s high, the loan might not actually even be a bargain. A tracker isn’t automatically the cheapest option just because it follows the RBA rate; a large margin could make the interest cost higher than some regular variable loans.

Second, check if there’s a floor rate. Some tracker mortgages set a minimum interest rate for the loan. For example, a lender might specify that the rate won’t fall below 2.50%, so even if the RBA cash rate dropped to 0%, your interest rate could not go below that floor. A floor protects the lender but limits how low your rate can go.

Also, consider the loan features. Some tracker loans lack extras like offset accounts, though they may still allow extra repayments or redraws. So just make sure you can live without any features the loan doesn’t include.

Finally, we’d always recommend that you check for any fees. Trackers generally don’t impose big break costs like fixed loans do, but it’s worth confirming that there’s no hidden exit fee or early repayment charge in the contract.

How Rate Movements Affect Your Payments

Again, the main appeal of a tracker is that your monthly mortgage payments respond instantly to interest rate changes. If the RBA moves the cash rate, your lender will adjust your rate by the same amount immediately. 

If rates go down, your mortgage repayments will get smaller. If rates go up, your payments will increase by the same margin. This is great when rates are falling, because you see savings straight away. But obviously the inverse of this means it can sting when rates are rising – you need to be prepared for the higher costs. 

And remember, the RBA typically meets monthly (except January), so your rate could change several times a year. Be sure to budget with that potential volatility in mind.

Fixed or Tracker Rate: Which Should You Choose?

So, should you go for a fixed or tracker rate? If you prefer monthly payments that don’t change, a fixed rate is probably going to suit you better. If instead you want to ride the interest rate waves and benefit from any cuts, a tracker could be better. 

For example, if you plan to sell or refinance in a couple of years, a tracker gives you more flexibility since there’s no break fee. A fixed rate could tie you down unless you pay an early repayment charge to exit early. 

Just keep in mind through all this that you might not even find a reputable tracker loan to even invest in, but this is the logic you’d apply if you were applying for one in England, for instance, where these loans are a lot more common.

How Upscore Can Help

Upscore’s Finance Passport lets you easily compare mortgage options side by side for free, which makes the search process much simpler. If you’re exploring home loans, make sure you give it a try and find a deal that suits your needs!

Get your Finance Passport now!

What Is a Lifetime Mortgage?

In simple terms, a lifetime mortgage is a loan that lets you release equity – that is, access some of the value of your home as cash – while you continue living in it. It’s essentially a type of equity release product that’s quite popular in the UK, and in Australia it’s very similar to what’s known as a reverse mortgage. 

You usually need to be around retirement age (typically 60 or older) and own your home outright (or have only a very small existing mortgage) to qualify. The cash you get is yours to use as you wish, and importantly, it’s tax-free – since it’s money you’re borrowing and not just income earned.

How It Works

So how does it work? With a lifetime mortgage, you’re borrowing money against the value of your home, but unlike a traditional mortgage there are usually no monthly repayments required. 

That’s right – you typically don’t even have to pay back a cent or make any interest payments while you’re still living in the home. Instead, the interest accrues (piles up) on the loan over time and any unpaid interest just gets added to the loan balance. 

The loan, plus the rolled-up interest, is only repaid later – usually when you either:

• Sell the property
• Move into long-term care
• Pass away and your estate sells the house

At that point, the sale proceeds settle the debt. After the loan and interest are paid off, any money there that’s left over from the sale goes to you or your beneficiaries. 

The good news here is that you still retain full ownership of your home throughout; the loan is just secured against the property as collateral. In other words, you get to stay in your home for life, and the lender’s security is that eventually the house will be sold to repay what you owe.

Lump Sum vs Drawdown Equity Release

Lifetime mortgages also have a bit of flexibility in how you take the cash. You can usually receive the funds as a lump sum all at once, or just set up a drawdown facility to release equity gradually in smaller chunks as needed. 

Some people are always going to take the lump sum option to, say, renovate their home or help the kids out early with an inheritance, but you’re generally going to see people opt for a regular supplemental income to boost their retirement lifestyle. 

Either way, you’re tapping into your home’s value. And because you’re only charged interest on the amount you’ve actually taken, a drawdown (taking money in stages) can save a good amount on interest compared to taking a big lump sum upfront. 

Interest and Loan Growth

Now, you might be wondering: what’s the catch? A lifetime mortgage (or reverse mortgage) isn’t exactly free money – it’s still just a loan with interest. Since you aren’t making monthly repayments, the interest will keep compounding for as long as the loan runs. So that means the amount you owe grows over time. 

Also, the interest rates on lifetime mortgages are usually a bit higher than the rates on regular home loans. 

Fixed Interest Rate for Life

Oftentimes, the rate is a fixed interest rate that’s set for life – this gives you some certainty about how the interest adds up, but it tends to be a bit more than a normal variable mortgage rate. 

Over, say, 10 or 20 years, a higher rate and compounding interest can significantly reduce the equity you have left in the home. So in practical terms, that means there might be a bit less value left for you or your family when the house is eventually sold. Go into this realising it’s a trade-off and that you’re getting cash now in exchange for giving up some of the home’s value later.

Your Protections

The good news is that any reputable lifetime mortgage comes with a negative equity guarantee. This feature has actually been a legal requirement for reverse mortgages in Australia since 2012, and it ensures that you (or your estate) can never owe more than your home’s value. 

In other words, even if the property market dips or you live a very long time and the interest just keeps growing, neither you nor your heirs will be lumbered with a debt that’s way beyond the value of the house. 

And when the house is sold, if by some chance the sale price doesn’t cover the entire loan and interest, the lender must absorb the difference – they can’t ask your family or estate to pay the rest. So you do have a bit of peace of mind there.

On the other hand, if the house sells for more than what’s owed, the extra proceeds still go to your estate. Also, you’re generally protected from ever being forced out of your home – as long as you uphold basic obligations like keeping the house insured and in reasonable condition, you have the right to stay there for life or until you choose to leave.

Inheritance and Estate Value

Try to also think about the impact on what you leave behind. Because the loan will eat into your home equity, there will be less value in the property to pass on to your heirs. Some people out there don’t mind using some of their kids’ inheritance to fund a more comfortable retirement (after all, it’s your money tied up in the house), but it’s something you might obviously want to think about. 

Australia doesn’t have inheritance tax, but it will still reduce the net value of your estate. However, remember that your children or beneficiaries will only miss out if the loan plus interest ends up consuming most of the house value. 

If your home continues to rise in property value, it might still sell for more than the loan amount, and any surplus goes to your family. Many lifetime mortgages also allow you to protect a portion of your property’s value as a guaranteed inheritance (this can be arranged at the start if you wish, by limiting how much you borrow). 

So just find a balance you’re comfortable with between enjoying your money now versus leaving it for later.

Early Repayment Options and Charges

You might also wonder, can you pay the loan early if your plans change? The answer is usually yes, you can choose to repay a lifetime mortgage early by selling the house or using other funds, but there could be early repayment charges depending on your contract. 

These loans are designed to last a lifetime (hence the name), so lenders sometimes charge a fee if you break the agreement in the early years. And that’s why it’s so important to check the terms. 

Some products are more flexible and might not penalise early payoff after a certain period, or they may let you make partial repayments without full closure. Additionally, some homeowners opt to pay the interest voluntarily (say, monthly or yearly) even though they don’t have to – this way, they keep the debt from snowballing too much. 

That’s optional, but it can be a smart move if you can afford it, because it means you’ll be preserving more equity in the long run. Overall, you have options to manage the loan if your situation evolves, but always be clear on any conditions.

How Upscore Can Help

Upscore’s Finance Passport helps you explore your borrowing options – internationally or locally – for free and shows how your financial background could get you a loan. 

Get started with Upscore Today!

Home Buying Costs – Things to Consider

Between making an offer and getting the keys, there are plenty of extra costs along the way outside of just handing over the price on the tag. There’s a lot more involved than just the agreed purchase price. 

From the obvious outlays to the subtle add-ons, every little piece can add up until the total feels much bigger than you initially expected. If you’re preparing to purchase property, you’ll definitely benefit from thinking beyond what that initial price tag you saw was and understanding all the extra expenses that come with the keys.

Hidden costs of buying a home can be especially surprising to first-timers. These are the fees and charges that aren’t always advertised in bold print but will definitely be there by settlement day. We’re talking about things like:

• Taxes
• Legal expenses
• Other home buying closing costs that tend to pop up during the process

So, it’s important to keep this in mind so you can budget properly and avoid any surprises. We’re going to be breaking down some of the major things to consider throughout this article, so keep reading to see what to expect when buying a house.

Upfront Costs of Buying a House

One of the biggest upfront expenses in Australia is the government charge known as stamp duty. Stamp duty (sometimes called transfer duty) is essentially a property transfer tax that you pay to the state or territory government when you buy real estate. It’s not just an Aussie thing, you see it in plenty of other countries.

It can be a hefty addition – sometimes as high as about 7% of the purchase price. That means on an already expensive home, the stamp duty alone can run into tens of thousands of dollars. The exact amount depends on the property’s value and location, but there are often a few concessions if you’re a first-home buyer. 

No matter what, stamp duty is a major part of the costs of buying a house that you need to plan for early on.

Admin Charges

Aside from stamp duty, there are other government and administrative fees to budget for. Whenever property changes hands, you’ll have to pay title transfer and registration fees so the legal ownership can be recorded. 

These fees aren’t huge individually – they tend to be flat charges that are set by your state or territory – but they’re unavoidable and will definitely be due at settlement. 

Legal costs are another upfront item. Most buyers hire a conveyancer or solicitor to handle the paperwork and make sure the sale actually goes through properly. But obviously, these are professionals that charge for their services. 

You might agree on a fixed fee or be billed according to how complex the transaction was. Either way, a good legal expert is well worth it to avoid mistakes in something as important as a home purchase, so remember to include this cost in your budget.

Building and Pest Inspections

It’s not uncommon for people to invest in building or pest inspections before finalising a purchase. It’s not exactly mandatory, but we’d highly recommend you do one for obvious reasons. 

It’s a hidden extra that’s definitely worth including in your budget. A qualified inspector will check the property for structural issues or pest damage so you’re not lumbered with any major problems after you’ve already moved in. The inspection might cost a few hundred dollars, but it offers peace of mind – way better to pay that than to discover serious issues when it’s too late.

Financing and Mortgage-Related Fees

The lender you’ve went to is usually going to charge various different fees to set your home loan up. For example, many lenders charge a loan application or approval fee to cover things like:

• Credit checks
• Property valuation
• Paperwork

Some of them will waive this, but definitely still be prepared in case it applies.

If you’re borrowing most of the property price and your deposit is relatively small, you’ve now got Lender’s Mortgage Insurance (LMI) to deal with. What is this? Generally, if you have less than a 20% deposit, the lender will require this insurance. 

LMI protects the lender (not you) in case you can’t repay the loan, and its premium is usually added to your upfront costs. This premium can be fairly significant and can get up to thousands of dollars. So it’s crucial to factor it in if it applies to you. 

The exact amount varies with your loan size and ratio, but it unquestionably adds to the costs of buying a home when your deposit is low, so do try to make a deposit of over 20% if you can.

Prepaid Costs When Buying a Home

Some costs in the home-buying process are actually just prepayments for future bills. So what are prepaid costs when buying a home? Essentially, they’re items like property taxes or insurance that you pay in advance. 

In Australia, this often means the seller has paid council rates (property taxes) past the settlement date, and you’ll reimburse them for the portion covering the period after you take ownership. It’s a cost that’s easy to overlook during budgeting, but again, it will definitely be on the final statement.

Home Insurance

Home insurance is another prepaid cost. Lenders usually make you get building insurance in place from the moment you settle – they want the house (their loan security) protected from day one. 

So you often pay a year’s home insurance premium upfront before or at settlement. That insurance payment is money you’d spend eventually anyway, but paying it earlier than expected mkps it a purchase expense you naturally need to plan for. 

You might also prepay some utility bills or body corporate fees to settle up with the seller at closing. If you’re wondering which are prepaid costs when buying a home specifically, tahink of basically anything where you’re paying now for a service or coverage you’ll luse later – like insurance, council rates or interest for the rest of the month.

All these prepaid items hit at the same time as your other fees, but they’re designated for future needs. It helps to set aside some budget for them so you’re not caught off guard. The bottom line here is that prepaids are part of the package, so just plan for them like you would with any other purchase cost.

Final Thoughts

Even after settlement, you might face extra expenses like:

• Moving your furniture
• Setting up utilities
• Buying a few essentials for the new house

So, it’s wise to have a small financial buffer for those. The good news is that with careful preparation, none of these costs really have to derail your dream. Just take the time to research and list out everything – upfront costs of buying a house, prepaid expenses, etc. – so you know exactly what to expect. 

When you plan for the full picture, you can go about the whole purchase confidently and don’t have to worry about the financial side of things.

How Upscore Can Help

Ready to take control of your home buying journey? Consider signing up for Upscore’s Finance Passport – it’s free, and a smart way to use your financial history to get your mortgage process started and get expert support.

Get your Finance Passport today!

What Is a Mortgage in Principle?

We get how getting on the property ladder feels at first. It’s obviously exciting, but the sheer number of steps and unfamiliar terms is complicated and you’re not going to find it easy. Looking at property listings and dreaming about locations is the fun part, but it won’t be long until you hit a wall of financial jargon. 

One of the first and most important terms you’ll encounter is the ‘mortgage in principle’. So, what is a mortgage in principle? Put simply, it’s essentially a document that makes you go from a window shopper into someone who is legitimately ready to purchase a home.

This first initial step is a bit complicated but you need to understand how it works to get far in the home buying experience. 

So, throughout this article, we’re going to break down:

• Exactly what it is
• Why it matters so much
• How you can get one
• What Upscore can do to help

Understanding The Basics First

A mortgage in principle is known by a few different names, which definitely adds a bit to the confusion. You might hear it called an agreement in principle (AIP) or a decision in principle (DIP). 

That said, the function is exactly the same regardless of what you may have heard it being called. It’s basically just a formal statement from a lender or bank that confirms that they are, in principle, willing to lend you a certain amount of money to buy a home.

It’s not a legally binding contract or a guaranteed mortgage offer or anything. Instead, it’s just a strong indication of your borrowing power that’s based on an initial look at your finances. A lender will take a look at your income and your spending before they run a preliminary credit check to arrive at a figure.

Now this figure isn’t just plucked out of thin air; it’s a calculated estimate that gives you a solid foundation for your property search. This document essentially serves as a mortgage promise, conditional on your financial circumstances remaining the same and the property you choose meeting the lender’s criteria.

Why It’s a Non-Negotiable First Step

Getting an agreement in principle before you start seriously viewing properties is always the best move – especially if the property you’re looking at is in high demand. When you walk into a viewing or speak to an estate agent with an AIP in hand, it changes the conversation entirely. 

It shows you’ve done your homework and are a credible buyer rather than someone who’s just looking around and not really ready to commit to anything major. Sellers are more likely to take your offer seriously if they know you have the financial backing ready to go.

Even outside of the obvious credibility benefit, you’re also getting a realistic budget from having one of these. It’s easy to get swept up in looking at properties that are just outside your price range. But the whole point of an AIP is to ground your search in reality. It tells you precisely what you can afford, which means you can focus your energy on homes within your budget. 

It’s not exactly uncommon to fall in love with a place you simply can’t secure a loan for, so this is a great way of avoiding that pain. It also prepares you for the next stage, the full mortgage application, because you’ve already completed the preliminary work.

How to Get Your Agreement in Principle

The process of applying for a mortgage in principle is thankfully quite straightforward and much quicker than the full application that comes later. Many lenders now allow you to apply online, so it’s way more convenient than how it used to be. You can also work directly with a mortgage broker, who can search the market for you and find the best potential deals for your circumstances.

To assess your financial situation, the lender will need some key information. You’ll typically be asked to provide details about your:

• Income (including your salary and any other regular earnings
• Existing loan repayments
• Credit card debt
• Household bolls
• Recent bank statements
• Payslips

The lender needs a clear picture of what comes in and what goes out each month to determine how much you can comfortably repay. This is all part of their initial credit checks to see if you’re a reliable borrower.

Will It Hurt My Rating?

This is one of the most common worries people have, and it’s fair enough. Will getting a mortgage in principle affect my credit score? The short answer is, usually not. Most lenders use what is called a soft credit check for an agreement in principle. 

A soft credit check is a top-level review of your credit file that is not even visible to other lenders. It gives the lender the information they need without leaving a hard footprint on your report. It won’t affect your credit rating in a negative way.

This is a key difference from the full mortgage application later in the process, which does require the opposite: a ‘hard’ credit check. A hard check is a deep dive into your credit history and is recorded on your file. Having too many hard checks in a short period can sometimes lower your credit score, as it might look like you’re desperately seeking credit. 

This is why the soft check for an AIP is so valuable; it allows you to shop around and get an idea of your borrowing power without any negative impact. You can confidently find out what you can borrow, and it won’t affect my credit score, which is a huge relief for many prospective buyers.

You Have Your AIP. Now What?

Once the lender has reviewed your information, they’ll issue your decision in principle. So, how long does a mortgage in principle last? Typically, an AIP is valid for a set period, which is usually around 90 days. This gives you a three-month window to find a property and have an offer accepted.

But make sure you keep in mind that the AIP is conditional. The final mortgage offer depends on a successful full application, where the lender will have to verify all your information again and conduct a valuation of the property you want to buy. 

So that means that if your financial situation changes for the worse during those 90 days – for instance, if you change jobs or take out a large car loan – your lender could revise or even withdraw their offer. 

Because of this, we’d always recommend that you try to maintain a stable financial profile from the moment you get your AIP to the day you get the keys. Your AIP is essentially your foot in the door for the serious part of the home buying process.

How Upscore Can Help

Is your dream home a little further afield than Australia? Many professionals and remote workers are now looking to invest in property in Europe or the UK. 

Our Finance Passport connects you with multiple lenders across different countries – it can still help with Australian properties, too – and allows you to compare deals and apply remotely, all with personalised support. 

Get started with your Finance Passport today!

Can You Get a Mortgage With Bad Credit?

So, can you get a mortgage with bad credit? Obviously, it’s everybody’s goal at some point to own a home, but we get that not everyone’s been blessed with a smooth financial life and may have made some poor financial decisions over the years that have resulted in bad credit.

Fortunately, the reality is that you can, but it usually takes a bit more effort and creativity since it’s definitely not going to be as easy. 

In Australia, lenders will definitely pull your credit file when you apply for a home (mortgage), so they see everything: 

• Your credit scores
• Any missed payments
• Defaults
• Any active credit cards or loans

Lenders literally use your credit rating to decide whether to lend you money. So, what are your options here?

Why Non-Bank Lenders and Mortgage Brokers Matter

Banks and building societies tend to shy away if your credit history is fairly rocky, which should be expected. That said, there are other home loan options available. For example, mortgage brokers and non-bank lenders often specialise in tougher cases where you can’t just go to a traditional bank. 

Brokers can facilitate bad credit home loans by finding a lender you wouldn’t be able to reach on your own. These specialists essentially take a “real-life” view of your finances and look beyond the credit score. 

So to put that simply, even with a poor credit score, a broker might find a lender willing to give you a shot if your situation has improved since back in the day and your other finances check out.

The Trade-Off: Higher Interest Rates and Risk Fees

Be prepared for a trade-off, though. Loans for borrowers with bad credit nearly always come with higher interest rates and extra fees. Bad credit home loans can be considerably more expensive than standard mortgages. 

A bad-credit home loan is basically a normal mortgage but with higher interest and fees attached. The rates are usually somewhere around 2-6% above the big banks’ current rates for the same deal.

So in practice, that means if prime borrowers are getting, say, 5% on a loan, you might be looking at 7% or 8% with a home loan with bad credit. And don’t forget risk fees or special insurance: with a higher loan to value ratio (LVR), lenders might tack on a risk fee instead of the usual Lender’s Mortgage Insurance (LMI). For example, at 90% LVR (just a 10% deposit), you could face a 1.5% risk fee on top of the higher rate.

That’s clearly quite heavy, but on the positive side, these loans often require less paperwork. Standard banks might demand strict documentation, but bad-credit lenders sometimes relax some rules. 

That said, less paperwork doesn’t exactly mean no requirements. You’ll still need a genuine deposit (often 10-20%) and proof of income and savings. Some lenders even let borrowers apply with only a 5% deposit on some products – essentially a 95% LVR – if the rest of their finances are solid. But more commonly, having at least 10-20% down will make lenders much happier.

Cleaning Up Your Financial History Before You Apply

Whichever lender or broker you use, get ready for scrutiny of your financial history. They’ll want to see that the mess in your credit past is behind you. So this means clean, “good” bank statements (no unexplained large overdrafts or missed bills), and that you’ve been paying any current loans or credit cards on time.

Lenders love to see that you pay your credit cards off in full each month and keep debts in check. Showing that you’ve consistently handled your day-to-day finances well can convince them that you’ve turned a corner.

Reduce Credit Inquiries

Also, remember that credit reports often include small marks that might surprise you – for example, applying for credit (like a credit card or car loan) will appear as a loan application enquiry on your report. 

If you’ve applied around the time you apply for a mortgage, it could look like more risk. A credit enquiry (even a loan application) is listed on your credit report and stays there for years. So it pays to space out applications and clean up any old issues.

Before you start shopping for that bad-credit mortgage, take a moment to improve your standing where you can. Even a few on-time payments on a small personal loan can raise your profile. Fix any errors on your credit report (you have a right to get mistakes corrected for free).

And yes, start saving as much deposit as possible – a bigger deposit lowers your LVR and often results in better rates and fewer extra fees.

After Settlement: When and How to Refinance

If you do land a loan, plan to revisit it later. Many experts (and lenders themselves) suggest that you actually just grab the loan now and refinance once your credit score and financial situation improve. 

For example, you could use a bad-credit loan to buy now, then, after you’ve built up savings and a perfect repayment record, refinance to a cheaper loan. That way you get into the market sooner, despite the extra cost, and then switch out of the premium price later.

Using Comparison Rates to See the Real Cost

And to compare all these pricier deals, make sure you always check the comparison rate. In Australia, lenders must quote both the interest rate and the comparison rate – the latter bundles in most fees. 

The comparison rate is the “real cost” of the loan and is usually slightly higher than the headline rate. So if a broker shows you a 7% interest rate but a 7.8% comparison rate, that extra 0.8% is the fees and charges. Comparing loans by their comparison rates (rather than interest rates alone) is especially important when your credit score isn’t great, as it makes sure you’re not getting any shocks with hidden costs.

So, what’s the bottom line? Poor credit history or a poor credit score makes things harder, but doesn’t shut the door completely. A missed payment, default or bankruptcy will definitely raise eyebrows, but tons of Aussies have rebuilt after worse. 

Just explain what the issues were (in your own mind and possibly to the lender) then show evidence that the situation is better now – perhaps through improved income or by paying all your billab ng time for the last year. Every lender is different. Some big banks might simply refuse, but many non-bank lenders will weigh these “explanations” seriously.

Why Non-Bank Lenders and Mortgage Brokers Matter

Get a broker involved, and you might find lenders who pre-vet your file upfront. In fact, brokers often offer free credit checks – they’ll spot things like bounced credit card payments or late utilities and suggest what to fix. 

As mentioned earlier, some of those lenders typically only work through brokers and deliberately help borrowers who’ve had trouble.

If you have any family who can act as guarantors or co-signers, that’s also an option. A guarantor (say a parent) can let you borrow at a higher LVR without paying LMI, and gives the bank extra comfort. 

How Upscore Can Help

Ready to check out loans from multiple lenders and get more home loan options? Sign up for Upscore’s Finance Passport today and boost your chances of securing the home loan you want.

Get started now!

Are Mortgage Rates Going Down?

Regardless of the reason, we can all appreciate that interest rates have been surging throughout Australia for a bit too long now, but are mortgage rates going down at last? 

Some of the early signs we’ve had in 2025 this far would indicate that they genuinely are. For instance, on the 20th of May 2025, the Reserve Bank of Australia (RBA) cut the cash rate by 25 basis points to 3.85%, which was actually its first reduction in years. 

The RBA noted that inflation has “fallen substantially since the peak in 2022” and growth was well below targets. So with inflation being back towards the 2-3% target and the economy sluggish, financial markets quickly began pricing in further rate cuts. 

So, what does all that mean? In short, many economists now see the RBA shifting into easing mode for the rest of 2025.

Cash Rate Movement in 2025

Over the last few months, the RBA have made it public that they plan on, albeit cautiously, pivoting. Governor Michele Bullock described the May move as a “cautious” rate cut, noting the Board had even considered a larger cut but chose to move carefully.

Observers point out that inflation has eased significantly and is expected to return to the 2-3% range a lot sooner than we all initially thought, while GDP growth remains weak. Some analysts are forecasting the cash rate to reach about 3.6% by July, with another 25bp cut in August. 

In effect, Reserve Bank policy has shifted from tightening to a much more gradual easing plan (The RBA is the sole issuer of monetary policy). 

So if inflation keeps falling and the economy stays soft, markets expect the RBA to cut again later in 2025. We’ll get into what kinds of impact this can have shortly.

Passing on the Cuts

As to be expected, a lot of the big lenders out there moved pretty fast to match the RBA. On the same day, the 20th of May 2025, NAB announced it would cut its standard variable home loan rate by 0.25% (effective from the 30th of May). Within hours, Commonwealth Bank (CBA) said it would also cut its home loan variable rates by 0.25% (effective from the 30th of May), and ANZ announced the same 0.25% reduction. 

Westpac followed suit, cutting its variable home loan rates by 0.25% for both new and existing borrowers (effective from the 3rd of June). Even Macquarie Bank lowered its variable home loan rates by 0.25% from the 23rd of May. You get the picture. In effect, nearly every major mortgage lender passed on the RBA’s rate cut to customers, but what does that entail?

Effect on Monthly Repayments

The good news is that these cuts translate into real dollar savings on monthly repayments. For example, CBA estimated that a 0.25% cut saves about $80 per month on a $500,000 owner-occupier loan under principal-and-interest repayments.

Larger loan amounts, of course, save more per basis-point: a 0.25% cut on a $600,000 loan would save roughly $100 per month. After two consecutive cuts, CBA noted many homeowners will “start to see a more meaningful change month to month” in their budgets. In other words, for average Australians carrying large home loan balances, even a quarter-point cut frees up hundreds of dollars each month.

Fixed vs Variable Mortgages

Most borrowers focus on variable-rate mortgages because those move with the cash rate. But fixed rate mortgages have been adjusting, too. Some banks actually cut fixed deals in anticipation. 

In early 2025, Macquarie cut its 1- to 3-year fixed home loan rates by up to 0.16%, which naturally made them very competitive. In fact, many lenders now advertise lower fixed rate promotions than a few months ago. 

If you have a fixed-rate loan now, your rate won’t change until that fixed term ends. But when your fixed term rolls off or if you take a new fixed-rate deal, you’ll find it set at a lower interest rate than before (be sure to compare principal-and-interest vs interest-only options and note the comparison rate whenever you’re looking at any fixed offer).

Exploring Your Options – What It Means for Borrowers

All things considered here, the trend is overall pretty good for borrowers. Lower interest rates means smaller monthly repayments on new and existing loans. That said, you’ve still got to compare the whole-of-loan cost, not just the headline rate. 

Fortunately, Australian rules require lenders to display a comparison rate that includes most fees, along with a comparison rate warning. For example, CommBank’s disclosure notes: “Comparison rate is true only for the examples given and may not include all fees and charges”. 

So this warning basically just reminds us that these advertised rates may exclude certain fees, and that two loans with the same nominal rate can have different total costs once things like fees and loan term are factored in.

Using Comparison Tables and Product Documents

When you’re thinking about choosing a home loan, try to take full advantage of some of the tools you have available. Many websites offer comparison tables that line up standard variable and fixed rates across lenders. 

These tables are a solid way of spotting low advertised rates quickly. But after that, dive into each loan’s detail – look at the product information. Every home loan product has a Product Disclosure Statement (PDS) and a Target Market Determination (TMD) from the lender (the product issuer). 

These documents spell out details like:

• Who the loan is designed for
• Its fees and charges
• Its key conditions

The TMD in particular will highlight the typical borrower’s objective financial situation . In short, just make sure any loan matches your situation. Loan amounts and term length matter too – a lower interest rate on a large loan still means big payments, and vice versa.

Important Information and Disclaimers

Try to keep in mind here that everyone’s objectives and financial situation are different, so don’t just immediately take what we’re saying here as financial advice – it’s not. 

Always make sure you’re reviewing all of the important information provided by the lender before acting on anything. Read the product disclosure statement (PDS) and target market determination (TMD) for any loan you consider. 

Furthermore, we strongly recommend that you check the “Important Information” section of any of those documents for fees, and watch for any “comparison rate warning” or similar fine print. 

Opportunities for Existing Borrowers

With the RBA cutting its cash rate and most lenders now responding appropriately, the overall trend is toward cheaper home loans than a year ago. Good news!

Keep an eye on rate announcements – when banks cut rates, it often pays to lock in a lower rate or refinance soon after. To put all this simply, borrowers who are informed and compare loan options are always going to benefit the most when home loan interest rates go down.

How Upscore Can Help

Ready to secure a loan? You’ll be able to compare offers from different lenders when you use Upscore’s free Finance Passport service, which is a solid way of getting the best loan terms for your circumstances. This can be a real advantage, whether you’re refinancing your Australian home loan or buying property overseas.

Get your free Finance Passport today!

How Much Deposit Do I Need For An Investment Property?

We get that buying an investment property can be exciting – it’s a whole different process to buying somewhere to live and your mindset is completely different – but it still raises a few practical questions. 

In Australia, lenders generally expect a larger deposit on an investment home loan than on an owner-occupied loan. Typically, you’ll need around 20% of the purchase price as a deposit (an 80% loan-to-value ratio) if you want to avoid paying lenders mortgage insurance (LMI), which we’d definitely recommend you aim to do. 

Some lenders will accept smaller deposits if you pay for the insurance. For example, some offer loans with as little as 10% deposit – but you must pay LMI. LMI is essentially insurance for the bank if you default.

How Much Can I Borrow?

So one of the main things that affects your borrowing power is your deposit size. This, alongside your income and whatever equity you already have. In practice, a larger deposit generally means a larger loan amount. Just make sure your first step here is reviewing your finances and working out how much you can borrow and afford.

Getting Pre-Approval

After this, get a home loan pre-approval so you can effectively ‘lock in’ your budget. A pre-approval essentially gives you provisional credit approval and shows sellers that you actually have a budget and are serious. 

Since mid-2024, lenders have been a bit stricter on serviceability. And as a borrower, you’ll likely find that you qualify for smaller loan amounts than in earlier years. So it generally pays to be conservative: always ask yourself “how much can I borrow for investment property” in realistic terms. 

As a rule of thumb, the maximum loan amount is roughly the purchase price minus your deposit, but it’s subject to your ability to service the loan. Use online borrowing-power calculators (you can find one at Upscore) or a broker’s help so you know you’re not overstretching.

Loan Types and Repayments

Next, consider your loan structure. You can choose fixed or variable rates, and principal-and-interest (P&I) or interest-only repayment options.

Interest-only loans keep your monthly repayments lower at first, so this helps your short-term cash flow when the property is finally rented. That said, interest-only comes with a longer-term cost: you pay no principal for a time, so you end up paying more interest overall.

Comparing Loan Rates

In fact, over the life of an interest-only loan you’ll usually end up paying more interest than with a standard loan. APRA data shows interest-only loans were about 21.0% of new housing lending in mid-2024. 

And keep in mind that interest-only loans often carry higher interest rates than P&I loans, which just means a higher ongoing cost. If you choose interest-only, definitely plan for a jump in repayments later when the interest-only period ends. 

So, how do P&I loans compare? These have higher repayments from day one but pay off the balance a lot more gradually. That said, there’s not really one ‘best choice’ here – it depends on your goals: interest-only can maximise cash flow now, while P&I is better if you plan to pay off the loan faster. 

As always, read all loan terms and conditions carefully to understand rates, fees and limits before signing.

Cash Flow vs. Growth

So, after you’ve got a better idea of what loan type suits your needs the most, you’ve got to start thinking about your broader investment strategy. 

Are you after steady cash flow or long-term capital growth? It’s not exactly uncommon for investors to aim for both, but one of those often takes priority over the other. 

If cash flow is key, look for areas that have strong rental demand and decent yields. If growth is the goal, you might want to accept lower initial rent in exchange for a suburb that’s on the rise. 

Generally speaking Australian gross rental yields are moving all the time, so it’s to give you an exact figure of what to expect. That said, inner-city yields (e.g. Sydney, Melbourne) tend to be lower. 

That might sound a bit counter-intuitive, but because the property’s market value in these cities are disproportionately high compared to the rental income it can generate, the yield is actually a bit lower if you’re focused on short-term gains.

Always calculate whether expected rental income will cover your loan repayments and costs. If rental income is lower than your expenses, you’ll have negative cash flow (and rely on the tax offset we described).

Negative Gearing Benefits

Remember tax rules: in Australia you can generally deduct most property expenses (especially loan interest) against your taxable income. This means if your rent doesn’t cover your costs, that loss (a negatively geared situation) can often be used to reduce your tax, which is not a bad situation to be in. 

Negative gearing can therefore offset some of your shortfalls while you wait for capital growth. It’s actually pretty common for investors to accept short-term losses since they know they will get tax deductions and hopefully capital gains later.

Choosing the Property

Location and property type affect both deposit size and returns. For example, Sydney’s median house price is about $2.05M (mid-2025), so a 20% deposit would be over $400k. 

Brisbane’s median is around the $960k mark, so the deposit needed is much smaller. Also consider rental yield: inner-city apartments often yield under 4%, while houses in popular suburbs or smaller capitals tend to yield around 5% or more. 

So just decide whether you want to prioritise capital growth (often higher in major-city suburbs) or rental yield (sometimes higher in regional or emerging areas).

Tenant Perspective

Think like you’re the tenant who’s going to be living here: amenities matter. This means you need easy access to:

• Public transport
• Schools
• Shops

Brokers even suggest writing down what tenants want – “good schools nearby, parking spots and noise levels” are commonly cited factors. Take these into account as they’re almost always going to improve your rental income and reduce your risk of vacancies.

Upfront Costs

And don’t forget the other costs beyond the deposit:

• Stamp duty
• Legal and lender fees
• Building inspections
• Any initial repairs or renovations 

These all have to be budgeted for. If your deposit is under 20%, add the LMI premium to your budget as well. For example, stamp duty on an $800k property can exceed $30,000, so these costs really matter. Altogether, these expenses can add tens of thousands to the total.

Final Steps and Credit Readiness

Before you make an offer, get organised. Secure formal pre-approval so you know exactly how much you can borrow. Lenders will then scrutinise your entire financial situation, which includes:

• Income
• Debts
• Expenses
• Credit score

That’s why you should address any credit issues and assemble all your paperwork in advance. Also, read every loan’s fine print. Know whether the loan is fixed or variable or how interest is calculated (including what fees or limits might apply.

Finally, consider getting professional help. A mortgage broker who specialises in property investing can explain which lenders have flexible rules (for example on LVR or interest-only) and help structure your loan to fit your strategy.

How Upscore Can Help

Looking to make the lending process as streamlined as possible? Upscore’s Finance Passport is free to try, so signing up early can give you insights into your credit standing before you apply.

Get started today!

How Do Credit Scores in Spain Work?

Just as anywhere else in the world, you’re not going to be able to secure the loans necessary for purchasing a property in Spain if you have a poor credit score. But how exactly does that system work in Spain? Is it basically just the same as back here in Australia?

Overview

The truth is, Spain doesn’t really use a FICO-style credit score like in Australia, the US or the United Kingdom. Instead, Spanish banks take a look at your credit information by checking databases of loans and any missed payments. 

So there’s not exactly one single “credit score” number like there is in those aforementioned countries that use a more familiar number system. In fact, the Banco de España runs the Central Credit Register (CIRBE), which logs virtually all loans, credits, guarantees and other debts over certain thresholds. 

Any person (including you) can request a CIRBE report for free so you can see what’s recorded about your debts. In Spain, banks mainly use these records (especially any negatives) to make decisions – they don’t pull a credit score from a bureau and boost you based on past payments, the way they might back home.

The Central Credit Register (CIRBE)

So to reiterate, Spanish lenders won’t pull a single credit number on you like Aussie banks do. Instead, they consult Spain’s credit registries. 

For example, the CIRBE collects details of anyone’s outstanding loans above about €6,000, regardless of whether you’re up-to-date on payments. It’s not a debtors’ blacklist: even borrowers who pay on time show up with their total “risk”. 

In contrast, separate files run by ASNEF (managed by Equifax) and BADEXCUG (by Experian) only list defaults and late payments.

So to put all that simply, Spanish banks basically scrutinise any negative entries on your record – multiple late payments could get a loan refused or delayed (they can stick around for up to six years) – rather than rewarding you for the good stuff.

Negative Reporting and Credit Bureaus

Lenders in Spain focus on your overall profile, such as your income and whether you’ve met past obligations. If your pay is high and you have a tidy bank history, that matters more than any foreign score. 

In practice, that means simply keeping up with payments – your payment history – is key. Having a “good credit score” back home won’t hurt, but definitely don’t expect it to just magically lower your mortgage rate in Spain. 

Instead, things like job stability, a large down payment and clean bank account statements have the most influence on the type of interest rates you’ll be offered. To give you a general idea, typical Spanish mortgage interest rates hover around 2-4% these days. Again, it generally depends mostly on economic factors and loan terms, not a borrower’s credit number.

How Is Spain Different?

So, does Spain have credit scores at all? Simply put, Spanish lenders don’t use credit scores to approve loans. There’s no system where you can earn points for on-time payments and then show a number to a bank. 

You’ve probably seen credit scoring systems like this in the United Kingdom or the US – those countries rely on models where higher is better. Spain’s approach is more focused on something called negative reporting. Only your slips (like unpaid debt or declared overdrafts) get noted in the system. 

The CIR simply records loans and any defaults, without assigning any credit score. That means banks don’t pull out a number and say you’ve “built credit” so much. Instead, good credit here basically means no bad credit events. That should be your main takeaway from all this. If you have no defaults or late payments logged, Spanish lenders will take that as evidence of being reliable.

Comparing International Credit Systems

We get that this whole concept of not having a literal credit score number can be a bit jarring if you’re used to that system in Australia, but not every country has credit scores. Some countries do have credit scoring systems (Canada, the United Kingdom, the US, etc.) while others – including Spain and the Netherlands – rely on negative credit reporting. 

The credit score in Spain is essentially non-existent from the borrower’s viewpoint. Spanish banks simply check registers. Even in the UK, there’s no single global number: the UK has three major credit bureaus (Equifax, Experian and TransUnion) and each of them has its own scoring system. 

If you’re an Australian, you’re undoubtedly going to recognise Equifax and Experian – in Spain, those names appear only behind the scenes. The consumer registers are ASNEF (which is run by Equifax) and BADEXCUG (run by Experian). These function a bit like credit reference agencies, but again they only report on trouble – they don’t certify good behaviour or compute a “higher score” if you’re frugal. And no, this is not anything like a social credit system; it’s simply about your borrowed money.

Building a Credit Profile in Spain

So what does this mean in practice? If you move to Spain, think of “building credit” as simply proving you meet your obligations. As mentioned, you’re not going to get a pat on the back for simply paying your bills on time – you just need to not be late and unreliable, and you’ll get the right loan.

It helps to open a Spanish bank account early (many landlords and utilities require it) and, if possible, get something like a modest credit card or small loan and pay it off immediately. That way the registry will see you have no unpaid balances. 

Keep your bills automated and on time. Aussie borrowers often worry about credit cards – without a local history, you might not even qualify for the same cards you have in Australia. 

However, Spanish banks sometimes offer basic or secured credit cards once you have an account and some income. Use those responsibly. The main idea you need to get behind here is to not get on any blacklist. In effect, you’re doing the opposite of aggressive credit usage (so your credit utilisation goes low by default because you have little in the way of drawn credit). 

This matches the usual advice from scoring systems worldwide (pay on time, keep balances low), even though Spain doesn’t tally those factors itself.

Interest Rates and Loan Approval

Above all, remember there’s no shortcut like a single “credit score” you can boost. Spanish lenders just want assurance you won’t default on their loan. They’ll ask for:

• Pay slips
• Savings statements
• Tax returns
• Proof of assets

Having more money to put down or a jointly signed mortgage (say with a partner or Spanish co-borrower) often matters more than any credit history. 

In terms of getting good interest rates, a solid work contract or owning property already can yield the best rates, rather than a borrowed credit score. 

Essentially, higher scores help in scoring countries, but in Spain the “score” is simply having no negatives and plenty of stability.

How Upscore Can Help

If you still have questions or want tools to help build credit across borders, check out Upscore’s Finance Passport –  it helps bridge the gap between your Australian credit record and lenders in Spain!

Get your Upscore Finance Passport today!

How Do Credit Scores in Italy Work?

Does Italy have credit scores? We get this question quite a lot but the short answer is always “not in the Aussie sense.” In Australia, we’re used to a numeric credit score from bureaus like Equifax or Illion. In Italy, creditworthiness isn’t summed up by a single number. Instead, the Bank of Italy runs a Central Credit Register (Centrale dei Rischi) that collects detailed information on loans and debts. 

This means if you search for “credit score in Italy” or “credit score Italy”, it won’t turn up a familiar range of points. Italian banks focus on your credit history and overall financial situation, not a three-digit score. 

Needless to say, this feels odd when we’re all so used to thinking in terms of “good credit” or a FICO-like number, but their system still serves a similar purpose: lenders must see if you can pay back what you borrow.

Overview

Italian banks and lenders submit all the loans and guarantees to the Central Credit Register. The Banca d’Italia even says this CR is “a database on household and firms’ debts towards the banking and financial system.” 

It’s fed by data from participating:

• Banks
• Financial companies 
• Other lenders

In practice, every mortgage or line of credit above a certain size will show up in your record. For any big debts (over about €30,000), every payment and even late payment is reported. So to put this simply, your credit information – not scored in points like it is here, but recorded – is centralised at the Bank of Italy. 

And if you have a solid record of on-time repayments, you build a good credit history in Italy; if you default or have missed payments, that also goes in the file.

From here, it’s fairly similar to how it is in any other country: Italian banks then read this register when considering a loan. They don’t pull out a credit score number; they see a history of your debts and payments. In effect, having good credit in Italy means having a clean, up-to-date CR file. 

Again, just like it is in Australia, people with good standing – meaning no missed loan payments – are generally going to find it easier to borrow and get better terms.

Checking Your Credit Report

So, can Australians view their Italian credit report if they’re looking to get a loan or mortgage here? Yes. If you plan on living or intend to borrow in Italy, you can request your CR data from Banca d’Italia. By law, the Bank of Italy must give you the information it has. 

How to Access This Information

You can apply for your Italian “credit report” (CR data) online or by mail, and it’s completely free. For example, the Bank of Italy site notes: “Access to Banca d’Italia’s Central Credit Register (CR) data is free of charge”. 

Within about 30 days or possibly a bit less, they’ll send you a report of what’s recorded under your name. This Italian credit report will list your:

• Loans
• Balances
• Any overdue amounts on file

Again, keep in mind that it isn’t going to give you a fancy score, but it shows your registered debts and indicates if you’ve ever been flagged as a problem borrower.

Interpreting Your Data

Reading your Italian credit report is fairly necessary as it’s your best way of confirming what the lenders see. If you spot an error (for example, a loan that’s been paid off), you need to get in touch with Banca d’Italia or the bank that reported it. 

And keep in mind that Italy has a few private credit information systems (SICs) like CRIF or Experian, but those are voluntary networks and separate from the official register. Most banks in Italy rely first on the Bank of Italy’s register.

How Behaviour Affects Credit in Italy

What actions build or hurt your credit when you’re in Italy? Much as in Australia, paying on time is always one of the most important parts. 

If you pay off loans and credit cards as quickly as you’re able to, your CR shows positive behaviour. Even single late payments don’t automatically label you a “bad debtor” until a lender decides there’s serious trouble. 

Banks actually evaluate your overall financial situation. This means they look at income, existing debts and repayment history together. For example, a lender will consider your debt-to-income ratio (the debt payments you have vs your salary) and past loan performance. The Bank of Italy explains that a customer is marked as bad only after an intermediary has assessed the customer’s entire financial situation – not just one missed bill. 

So this basically means that if you run up credit card balances (which Italians often call “revolving credit”), how you service those balances matters. For example, if you’re carrying large credit card debt or have a bunch of loans with late payments it’ll show up as higher indebtedness in your CR file. That would mean you’d struggle getting other loans in the future.

Likewise, taking out loans can help build history. Even though Italy doesn’t have a credit-score number, you’re naturally still going to be rewarded when you borrow and repay the lender promptly. 

The CR is basically supposed to “improve the assessment process for creditworthiness” by giving a full credit history. In other words, a history of loans that have gone well helps. So if you use credit cards or instalment loans, make sure to pay them off on schedule. 

Being New to Italy and Building Credit History

The whole system of needing good credit history to get a loan is obviously going to be hard for newcomers as you won’t have any local credit history yet. When you apply for credit or a mortgage, Italian lenders will see no entries in the CR under your name. 

That’s not the same as bad credit – it just means “unknown.” In practice, banks deal with this by looking harder at other signals, such as:

• Large deposits
• Strong income
• International credit proofs

You might be required to provide extra documentation (like your Australian credit report, income letters, foreign property ownership, etc.) or pay even more down payment.

It’s also common to see stricter debt-to-income limits (often mortgage payments capped somewhere around 30-35% of your net income). Because of this, many foreign buyers find it takes quite a while for them to qualify for all the best mortgage rates. 

It’s not exactly a quick solution, but one way you can help get to that stage is to simply be a bit more patient. That’s as simple as paying any Italian bills (like your rent or utilities) on time to slowly build a domestic track record. And make sure you start with smaller credit lines (for example, a secured card or a modest personal loan) before going for a big mortgage. 

Over time, those entries in the CR will form your Italian credit history. Meanwhile, showing a record of good credit behaviour back home in Australia (like on-time home loan or credit card payments) can help convince banks to approve your loan here. 

How Upscore Can Help

Upscore’s Finance Passport can be massively helpful for securing mortgages overseas. This platform lets you package your Aussie financial history – income, liabilities, credit accounts, and repayment history – into a format Italian banks can review.

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