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Why your bank rejected you - and who will still say yes

Getting declined by your bank feels personal, but the decision is usually policy not preference. Understanding which policy rule tripped your file helps you pick the next lender - or restructure the file - rather than applying blindly elsewhere.

The seven most common decline reasons

  1. Serviceability fail at the 3% buffer. Your income passes at the quoted rate but fails at (rate + 3%). Fix: reduce the loan amount, extend the term, or find a lender with a sharper actual rate.

  2. Credit score below threshold. Equifax score under 500 or Illion under 450 triggers auto-decline at most majors. Fix: obtain the credit report, dispute any errors, wait out any recent enquiries.

  3. Recent default or paid default within five years. Majors decline, but Pepper, Liberty, La Trobe routinely approve at 80-120 bps over majors.

  4. Thin credit file. New to Australia, under 25, or have never held credit. Majors want at least one historical credit product with 6+ months of activity. Fix: obtain a low-limit credit card and hold for 6 months, or apply with a near-prime lender.

  5. Employment probation or contractor status. Most majors want you off probation before signing. Contractors need 1-2 years of ABN + consistent invoicing. Fix: wait it out or apply with a lender that treats contract income as PAYG after 6 months in the role.

  6. High LVR with thin genuine savings. 95% LVR requires 5% from “genuine savings” held for 3+ months. Gifts and tax refunds don’t count unless you parked them for 3+ months first.

  7. Property type or location. Studios under 40sqm, rural residential over 10ha, serviced apartments, company-title units, and properties in declining mining towns all trigger valuation or policy issues. Fix: different lender, or a different property.

What to do after a decline

Do not reapply at the same lender within 3 months unless something substantive changed. Do not apply at four lenders in rapid succession; credit enquiries cluster on your file and each subsequent lender sees the decline history.

Instead, get the decline reason in writing if possible (the bank is not obliged to provide it but often will), match the reason to a lender whose policy accommodates your profile, and apply once.