This is an illustrative example based on common patterns seen in home lending — not a specific individual’s story.
Key takeaway: A high credit score measures how reliably you repay debt — it says nothing about your actual living expenses. Lenders assess serviceability separately using a minimum expense benchmark (the Household Expenditure Measure, or HEM), and a genuinely high-spending household can be knocked back on that basis alone, regardless of how clean their credit file looks.
Consider a couple — we’ll call them Tom and Ren — both with credit scores above 800, no missed payments ever, combined income of $165,000, living in the Illawarra. On paper, they looked like the safest possible borrowers. Their pre-approval came back lower than expected anyway, and the reason had nothing to do with their credit history at all.
This confuses a lot of people, understandably. A credit score feels like the report card for how “good” you are with money, so a knockback despite a great score reads as a mistake. It usually isn’t — it’s just a completely different test being applied.
The Problem Wasn’t Their History — It Was Their Actual Spending
- Their bank statements showed genuine monthly spending — dining out, subscriptions, a gym membership each, regular travel — that sat well above the HEM benchmark for their household size and income bracket. Lenders are required to use whichever figure is higher: the benchmark or your declared/observed expenses.
- Because their real spending was the higher number, it became the figure used to calculate what they had left over to service a loan — not their income minus a generic estimate.
- Neither of them had ever budgeted formally, so they’d genuinely underestimated their own average monthly outgoings when asked directly, which meant the bank’s own transaction-data assessment came in higher than their verbal estimate.
What Typically Changes the Outcome
- Genuinely reviewing 3-6 months of real spending before applying, rather than guessing, so there are no surprises when the lender pulls the same data
- Trimming discretionary spending in the lead-up to an application — not permanently, but enough that the assessed figure reflects a realistic, serviceable household budget
- Understanding that closing unused subscriptions and recurring charges helps the actual assessed number, even if the credit score itself doesn’t move at all
The Realistic Result
Households in this situation commonly recover a meaningful chunk of borrowing capacity within a couple of months of adjusting genuine discretionary spending — often without their credit score changing by a single point, because the two things were never actually connected.
The Actual Lesson
A credit score and a serviceability assessment answer two different questions: one asks whether you pay debts back reliably, the other asks whether you’d have enough left over each month to keep doing it. A great score can coexist with a lending knockback, and it’s worth understanding which test you actually failed before assuming something’s gone wrong with your file.
Written by Michael Wignall, who’s spent 30+ years in banking and home lending across the ACT, Illawarra, and Riverina regions of NSW.
