Credit Score Impact & What Not to Do Before Applying

Your credit file influences how lenders view your application, but it's not the only factor they consider.

Department of Home Affairs employees are often surprised to learn that a single credit inquiry or a missed phone bill can shift an application from unconditional approval to conditional, or from a standard variable rate to a higher risk pricing tier. Lenders don't rely on your credit score alone. They assess your income stability, your debt position, and your demonstrated repayment behaviour across every credit account you hold. For public servants with secure employment, the difference between approval at a low rate and approval at a higher rate often comes down to what appears on your credit file in the six months before you apply.

How Lenders Use Your Credit File to Assess Risk

Lenders pull your credit file from one or more credit bureaus within 24 hours of receiving your application. The file shows every credit inquiry made in your name over the past five years, every open account, every closed account, and every repayment default or overdue payment reported by a credit provider. Each element is weighted differently depending on the lender's internal credit policy and the loan product you're applying for.

Consider a Department of Home Affairs employee applying for a home loan with a 10% deposit. The applicant has stable APS income, no existing debt, and has been with the department for three years. The lender assesses the file and sees four credit inquiries in the past 90 days: two from comparison sites, one from a car dealer, and one from a furniture retailer on a buy-now-pay-later product. None of those inquiries resulted in new debt, but the lender flags the application for a second review because multiple recent inquiries suggest the applicant may be taking on commitments not yet visible in their financial position. The approval is delayed by five business days while the lender requests written confirmation that no new debt has been entered into since the application was lodged.

Which Credit Behaviours Shift You into a Higher Risk Category

Missed payments are weighted more heavily than inquiry volume. A single default over $150 that remains unpaid will often result in a decline from major lenders, even if your income is stable and your deposit is 20%. Smaller lenders and non-major lenders may still approve the application, but the interest rate will typically be 0.5 to 1.5 percentage points higher than the equivalent product offered to a borrower with a clean file.

Buy-now-pay-later accounts such as Afterpay, Zip, and Humm are treated as ongoing credit commitments. Even if the balance is nil at the time you apply, the lender will include the maximum available limit in their serviceability calculation. For a Department of Home Affairs employee earning $95,000 and applying for an owner-occupied home loan, three buy-now-pay-later accounts with a combined limit of $6,000 can reduce borrowing capacity by $30,000 to $40,000 depending on the lender's serviceability buffer and the loan structure.

What Not to Do in the Six Months Before You Apply

Close existing credit cards only if the closure improves your overall position. Lenders assess both your total available credit and your credit utilisation ratio. Closing a card with a $10,000 limit that you've held for five years may reduce your available credit, but it also shortens your credit history if that card is your oldest account. If you're carrying balances across multiple cards, paying down the balances and keeping the accounts open is usually a better outcome than closing accounts and reducing your demonstrated credit history.

Do not apply for new credit within 90 days of lodging a home loan application. Every inquiry is visible to the next lender. If you've recently applied for a car loan, a personal loan, or increased the limit on an existing credit card, the home loan lender will assume that commitment exists even if the funds have not yet been drawn. You'll be asked to provide a signed declaration confirming the status of every recent inquiry, and any new debt will be included in the serviceability assessment at the full limit amount.

Do not miss payments on existing commitments, even small ones. A $29 late fee on a mobile phone account reported to your credit file can delay approval while the lender seeks an explanation. Public servants often assume their employment stability offsets minor credit blemishes, but lenders treat missed payments as a behavioural indicator that applies regardless of income source. If you've missed a payment in the past 12 months, obtain a letter from the credit provider confirming the account is now paid and up to date, and include that letter with your application.

How Lenders Assess Applications from Public Servants Differently

Your employment with the Department of Home Affairs is considered low-risk income by most lenders. APS employees are assessed under standard income verification policies, but the stability of the role allows some lenders to apply higher debt-to-income ratios than they would for casual or contract workers. That advantage is removed if your credit file shows defaults, multiple inquiries, or high credit utilisation.

Consider an applicant on an APS 5 salary of $88,000 applying for a variable rate loan with a 15% deposit. The applicant has two credit cards with a combined limit of $18,000, both with nil balances, and no other debt. One lender includes the full $18,000 in the serviceability calculation and approves borrowing capacity of $520,000. The applicant closes one card to improve their position before submitting a second application to a different lender. The second lender sees the recent account closure, requests an explanation, and discovers the closure occurred two weeks before the application. The lender treats the closure as an attempt to manipulate the assessment and applies a more conservative debt-to-income ratio, approving borrowing capacity of $495,000. The outcome was worse because the timing suggested the applicant was managing their position specifically for the application rather than managing their credit as part of normal financial behaviour.

When to Review Your File Before Applying

Request a copy of your credit file from each of the three major bureaus at least 90 days before you intend to apply. Equifax, Experian, and illion each hold slightly different information depending on which credit providers report to which bureau. Check for errors, closed accounts still showing as open, and any defaults or overdue payments you weren't aware of. If you find an error, lodge a dispute with the bureau and the credit provider immediately. Corrections can take 30 to 45 days to appear on your file.

If your file shows a default that has been paid, obtain a letter from the credit provider confirming the amount was paid and the date of payment. The default will remain on your file for five years from the date it was listed, but a letter confirming payment allows the lender to assess the default as historical rather than ongoing. Some lenders will approve applications with paid defaults depending on the amount, the age of the default, and the explanation provided. Others will decline automatically. Knowing what's on your file before you apply allows you to target lenders whose credit policy accommodates your position.

If you're planning to apply for pre-approval or you're ready to move forward with a property purchase, your credit file needs to support the application. Call one of our team or book an appointment at a time that works for you.

Frequently Asked Questions