Most rejected applications come down to serviceability, not credit score. Here is how Australian lenders calculate what you can borrow — and what to change first.
Two different things determine how much you can borrow, and confusing them causes most rejected applications.
A borrower with a poor score and high income can be approved with a higher rate. A borrower with an excellent score and a $90,000 debt load can be declined outright. They are assessed separately, and improving the wrong one wastes months.
How Australian lenders actually assess serviceability
Lenders broadly follow the APRA servicing standard, using a stress-tested interest rate several percentage points above your actual rate. Most major lenders currently assess at the greater of your contracted rate plus roughly 1.8%, or a floor rate around 7–8%.
The practical consequence: a $600,000 loan at 6% is assessed as though it costs you 7.8% or more. Your assessed repayment is roughly $900 a month higher than your actual repayment. That margin is why income requirements are higher than people expect.
| Income | Realistic max loan (single, no dependents) | With one dependent | With two dependents |
|---|---|---|---|
| $80,000 | ~$380,000 | ~$340,000 | ~$310,000 |
| $95,000 | ~$450,000 | ~$410,000 | ~$370,000 |
| $110,000 | ~$530,000 | ~$480,000 | ~$440,000 |
| $130,000 | ~$620,000 | ~$570,000 | ~$520,000 |
Indicative only. Every lender applies its own buffers, dependants, existing debts and living costs. Treat this as a starting point for the calculator, not an approval in principle. A licensed credit adviser can give you a genuine figure for your situation.
Living expenses — the assumption that surprises people
Lenders add assumed living costs on top of your declared debts. Most use a national median figure around $9,500–$10,500 per month for a single adult with no dependants, and more per dependant depending on the assessment model. This is added whether you spend it or not.
If your actual living costs are genuinely higher — you support an adult child, you're paying private school fees, you have dependants — say so. Lenders can often assess on actuals, and where they can, your borrowing capacity increases.
Debts that reduce your borrowing capacity
| Debt | Typical treatment | How to reduce the impact |
|---|---|---|
| Credit cards | 100% of the limit deducted | Reduce the limit to 10–20% of your income, then leave 3 months to reflect |
| HBA, personal loans | 100% of repayments deducted | Pay off or refinance before applying |
| Student loans | Usually excluded for most borrowers | Confirm with the lender — policies vary |
| Buy now, pay later | Treated as a personal loan if over the threshold | Pay off before applying — frequently the fastest fix available |
| Overdrawn accounts | Can count as two offsets | Close and reopen 1–2 weeks before applying |
| Credit cards at 95% utilisation | Crashes your score even if you always pay in full | Bring the balance below 30% before applying |
Reducing a credit card limit can raise your score
This sounds backwards but it's correct. Scores partly measure how much of your available credit you use. If your limit is $20,000 and you owe $1,000, you're using 5% — excellent. Request $7,500 instead and you're at 13% of a smaller pool, which some scoring models read as better managed. Do it one card at a time with a fortnight between, so the change is visible.
Repairing a damaged credit file
- Order your free credit reports today. Equifax, Experian and illion all provide a free annual report in Australia. Check all three — lenders use different bureaus, and errors are common.
- List every error. Dates, amounts, creditors. Most disputes are resolved in weeks with a statutory creditor obligation to correct genuine errors.
- Check for identity theft indicators. If there are accounts you don't recognise, that is a credit repair priority, not a score priority. Contact the bureau's fraud team.
- Register a credit-relevant default. If you genuinely missed a mortgage or card payment and it is listed, there are formal processes to have it noted as a credit-relevant hardship or to have free credit listings removed after the reporting period.
- Close unused accounts — but only after checking it doesn't reduce total available credit disproportionately.
- Three months of consistent on-time payments will move a score more than any other single action. Set up direct debit so you can't miss.
Repair companies that can't actually remove data
Under Australian law, credit repair companies cannot remove accurate negative information, and several have been found in breach of ACL for misleading claims. The only entity that can correct your file is the creditor that supplied the information, or the bureau itself. If a company promises to "delete your default", be cautious — ask exactly what they legally can do, and at what cost.
Order of operations that actually moves the needle
Pay off BNPL and personal loans, reduce credit card limits to roughly10% of income, and pay down card balances. This alone can move borrowing capacity by $50,000 or more, and it works in weeks rather than years.
Correct any inaccurate entries, then maintain three months of perfect direct-debit payments. Score improvements become visible around month four.
Lower debt and a corrected score shift you from "declined" or "higher rate" into the standard tier, which on a $600,000 loan is worth several thousand dollars a year.
We publish general information, not legal or financial advice. Off-the-plan contracts, conveyancing and settlement law vary by state and by individual circumstances. Always have your own independent legal adviser review any contract before you sign — the cost is trivial against the risk. Found something wrong? Tell us.