Feeling overwhelmed with your credit card debt?
January 9, 2019
How much deposit do you need to buy property?
February 4, 2019Submitting a loan is not like it used to be. The bank ask for evidence of absolutely everything, basically down to what you had for breakfast! There are a few deal breakers to look out for if you are considering applying for a loan.
Gambling
My boyfriend and all his mates love a punt on just about anything. In fact, it’s almost Australian culture to love to have a bet. I understand that not all gambling is problem gambling but the banks are not so understanding. Nowadays, almost every lender will ask for between 1-3 months bank statements for the account you get paid into. If there are multiple betting transactions per month you are very likely to be asked to explain it or worse, they will just decline your loan.
If you are going to apply for a loan it is probably a good idea to have a separate account linked to your betting account that is not the account you get paid into. I’m not saying you shouldn’t declare your betting expense every month, I’m just suggesting that the credit manager doesn’t need to see your betting transaction history.
Credit Enquires
Every time you submit an application for finance (including; payday lenders, buy now pay later, afterpay, personal/car loans, credit cards and mortgages) a ‘credit enquiry’ is left on your credit file showing that you applied for credit. The credit enquiry shows which financier the application went to, when and for how much.
If you have too many recent mortgage related credit enquiries the lender you are applying with will worry that you have been declined by all the other lenders you have applied to and they will wonder what the other lenders know about you that they don’t. To add to this, multiple credit enquiries will also reduce your credit score.
If you have too many enquiries on your credit file the lender will see you as a high risk borrower. When it comes to credit enquiries, major banks and mortgage insurers prefer if you only have 1 or 2 credit enquiries in the last 6 months and any more than this it is likely your loan will be declined.
There are many brokers that do a lot of damage to clients credit files by doing what we call “shopping the deal” i.e. sending it to several lenders. A good broker will never do this. A broker should do all the work upfront meaning we speak to the lenders, make sure the scenario fits policy and send to 1 lender only once we are 99% sure it will be approved.
Payday lenders
If only prospective borrowers knew how much these loans ruin your chances of getting a home loan. I know they may seem like a good idea at the time if you are short of cash but trust me they are not! Not only do they charge you an obscene amount of interest (don’t get me started!) it shows the bank you cannot manage your cash flow. If you can’t manage your cash flow for your day to day expenses without a home loan, they won’t believe you can manage things with a home loan.
If you are short of cash you are better off getting a personal loan from a legitimate lender such as Rate Setter or Pepper Money or one of the banks or even get a credit card because all of these options will not do as much damage to your credit file as a payday lender will.
Adverse Credit
It is worthwhile checking your credit file before you submit a loan. Even the best of us can fall victim to a sneaky telco not following the correct debt collection process and lodging a default on your credit file without you knowing.
Almost all lenders will instantly decline a loan if you have any defaults (unless you use a specialist lender) so if you find out about them before you lodge an application you can fix this before you apply. It is definitely worth doing as the interest rates available to you at a mainstream lender are much cheaper than what you get at a specialist lender if you have to go to one due to the defaults.
These are just a few things to keep in mind if you are planning to apply for a home loan but it really is only the tip of the iceberg. Recent increased regulation in the lending industry has meant lenders have to ask more questions & seek more verification of your situation so having a good mortgage broker in your corner can prove invaluable if you are looking for a home loan. We can do free credit checks which don’t leave a mark on your credit file so please let us know if you would like us to send you a copy of yours.
Please send us a message or give us a call if you would like to have a confidential chat.
