Many homebuyers assume the main hurdle to securing a mortgage is raising enough equity or meeting income requirements. In practice, a growing number of Israelis are discovering that a significant obstacle lies in their personal credit score. Over the past year, the share of mortgage applications rejected by banks has risen from 5% to 8%, according to data from Darcenu, a mortgage advisory network.
Some of those rejected are eligible for benefits from the Ministry of Construction and Housing who won apartments through the government’s “Price for Residents” housing lottery program. They often discover the problem only after choosing an apartment and approaching the bank for a mortgage. Many are unaware that everyday financial behavior that seems minor, such as a bounced check, an unpaid standing order or a temporary overdraft, can turn them into mortgage rejects or, at the very least, borrowers charged interest rates tens of percent higher than others.
Since the Credit Data Law took effect in 2019, the Bank of Israel has centralized financial information on every citizen and transferred it to private credit bureaus operated by licensed entities. The law regulates the collection of data on credit obligations and its transfer to lenders for risk assessment. Its stated goals are to increase competition in the credit market, expand access to credit and reduce discrimination.
Business information companies aggregate the data and produce a credit report and credit score for each citizen. These have become key tools in banks’ decisions on mortgage terms and other loans. The data are stored in the Bank of Israel’s credit database in accordance with the law and include both positive and negative information on meeting financial obligations.
‘Not a punishment or a reward’
For example, the credit score produced by business information firm CofaceBdi serves as a benchmark for lenders when deciding whether to grant a mortgage or loan. Credit scores in Israel, which banks and financing bodies rely on when reviewing loan and mortgage applications, reflect an individual’s credit history and are based solely on data received from the Bank of Israel’s credit data system. Scores range from 300 to 850, with 300 the lowest and 850 the highest, indicating excellent financial conduct. Income data and asset ownership are not included and therefore do not affect the score.
The main components used to calculate a score include payment history, credit utilization rates, the age of credit facilities and accounts, the mix of existing credit, and any positive or negative information reported for up to three years from its end date. CofaceBdi says information can be corrected only if it is incorrect or outdated, either through the reporting body, such as a bank or credit card company, or via the Bank of Israel’s online portal.
The score plays a significant role in mortgage approvals as part of banks’ risk assessment systems. A low score, defined as 300–639, is considered “high risk” and can lead to mortgage rejection, demands for additional collateral, higher interest rates and closer scrutiny of existing financial behavior. A high score, 660–850, indicates stability, improves approval chances and allows for better interest terms.
Banks use credit data to assess whether a customer has had late payments or returned charges in the past year, the extent to which credit limits are utilized, whether multiple loans were taken in a short period, and whether there are negative records such as enforcement proceedings. According to the Bank of Israel’s 2024 annual report, the most recent published, risk levels have risen among some households, reflected in an increase in arrears and negative credit events. These trends have made credit scores a central tool in risk assessment, particularly for mortgage applications.
Roy Minkov, CEO of CofaceBdi, says that “credit providers in Israel now rely on credit scores as part of their decision-making process, both for consumer loans and mortgages. It is important to understand that the score does not punish or reward the customer; it simply reflects actual financial behavior in numerical form.”
“When there are arrears, excessive use of credit limits or instability in payments, the score drops accordingly, and banks translate that into higher risk,” he says. “By contrast, responsible and consistent conduct over time improves the score and makes it easier to obtain a mortgage on better terms. In a reality where lenders rely almost entirely on the score, the public must understand that daily behavior, not the number itself, is what influences whether credit is approved, on what terms and at what interest rate.”
This raises the question of how wide the gap can be between a homebuyer’s economic reality and how banks interpret the data, even for stable households with high incomes. Lital Kapchitz, a mortgage adviser and franchisee at Darcenu, describes a couple who approached her ahead of purchasing a new apartment.
“At first glance, they looked like clients any bank would be happy to approve,” she says. “A couple with high incomes, savings and excellent repayment capacity. But once we began the process toward purchasing their new home and taking out a mortgage, it turned out the reality was somewhat different.”
Kapchitz explains that each spouse had a separate bank account. When their credit reports were produced, the husband’s score was very high, but the wife’s score was extremely low. Behind the data was everyday behavior that seemed entirely reasonable to them: for years, whenever a check or standing order bounced from the wife’s account, she transferred money from the husband’s account the following day. “In their eyes, there was no problem. The money was always available,” she says.
“What they did not know was that every such return is recorded in the credit data system and directly affects future scores with the banks,” she continues. “Over the years, quite a few financial blemishes accumulated in the report, and the banks classified the couple as ‘bank rejects,’ meaning high-risk customers. The result was interest rates almost double those of a standard mortgage. On a loan of 1 million shekels, that meant a total repayment of about 3 million shekels.”
After identifying the issue, Kapchitz guided the couple through a financial rehabilitation process: stabilizing accounts, changing payment patterns and stopping late repayments. At the same time, she advised them to increase the equity paid to the developer upfront and delay taking out the loan. After about six months, she presented the banks with an explanation of the improved conduct, which increased approval chances. Ultimately, the bank approved the mortgage on standard terms, saving the couple nearly 1 million shekels in total loan costs.
“There are companies today that promise mortgage rejects they can completely erase a negative score, but that is not recommended,” she says. “Deleting data can raise suspicion among banks, especially when there is no documentation of genuine financial rehabilitation. Instead of hiding, it is better to show the bank that the improvement is real and based on behavioral change and sound financial understanding.”
For prospective homebuyers, she recommends obtaining a personal credit report once a year from a credit data company to review their score and ensure there are no irregularities, and to avoid bounced checks or standing orders. “Even if the money is transferred the next day, the damage has already been recorded,” she says. “Proper management of bank accounts and credit card companies is no less important than a high income.”
‘The score fell to an unusual level’
Gilad Barzilay, a mortgage adviser and franchisee with Darcenu, worked with a couple in their 50s from Acre who won an apartment through the “Price for Residents” program. The state benefit was significant, about 700,000 shekels compared with market prices, so they rushed to sign the purchase contract within 30 days. When they approached the bank where they had held accounts for 20 years, they discovered they were denied a mortgage.
“A personal credit score does not reflect the present; it is the result of weighing data from the past three years,” Barzilay says. “In 2024, the husband, a self-employed event producer, was hit hard by the ‘Swords of Iron’ war and the collapse of a major client. Checks bounced, income fell and his score plunged to an exceptional level. The situation was further complicated because both spouses are self-employed, a group the banking system finds difficult to assess consistently. Any income fluctuation becomes an obstacle.
The couple found themselves bound by a legally binding purchase contract with no way to finance the deal. “I analyzed their financial history in depth,” Barzilay says. “I saw the difficulty in 2024, but also the impressive recovery in 2025. We understood that the raw score did not reflect reality. These were not risky borrowers, but hardworking people who experienced a temporary crisis.”
Barzilay built a financial strategy, approached senior bank officials and presented the data in human terms. “The crisis was temporary, the recovery was stable, and at the beginning of 2026, they were excellent borrowers,” he says. After what he describes as a professional struggle, the mortgage was approved.
He advises homebuyers not to sign a purchase contract before securing “bank backing.” “In the ‘Price for Residents’ program, time pressure is intense, so it is advisable to check financing before signing and not approach the bank alone if buyers have gone through a complex financial period,” he says. “The phenomenon of mortgage rejections due to negative credit scores is not marginal, and it is only expanding. The Credit Data Law was meant to empower the public by creating a centralized and transparent financial information system, but those who do not understand the rules of the game may pay a heavy price.”