Having a deposit may not be enough to get you a loan if your credit history is not good!
Lenders are ready to scrutinise your purchasing behaviour before approving a personal loan. Be ready to show your future lender 6 to 12 months of bank statements that will be scrutinised from every possible angle.
Unfortunately, when it comes to credit rating, your word is just not enough for your lender. It is your responsibility to establish a perfect credit score before lodging your application.
Before you start to panic, if your expenditure in the past has not been ideal, there is time to introduce some disciplines into your day-to-day life that will prepare you for that loan application!
Your credit history reflects not only how you spend your money, but also how you approach other loan repayments, credit cards and timely payment of bills.
There are three major companies in Australia that produce credit scores, Equifax, TransUnion and Experian.
How is The Credit Score Calculated?
The main factors involved in calculating a credit score are;
- The number of accounts you have
- The types of accounts you have
- Your used credit vs. your available credit
- The length of your credit history
- Your payment history
How Can I Improve My Credit Score?
You can request a copy of your credit report score once every 12 months. Where you have been refused credit, you can request the report more often.
Check your credit report carefully to ensure it is correct. It is not unusual to find errors or dated information with respect to a debt that may have been rectified. If you identify any errors, it is advisable to try and have them rectified. Generally, you will need to go back to the source of the information to get it rectified. For example, if a lender has dated information against your record, you will need to contact the lender to get it rectified.
Paying your bills on time is critical to your credit rating. An unpaid bill can appear on your credit report and have detrimental effects on your credit score. If you identify any unpaid bills, get it resolved quickly. Unfortunately, this will not remove the record from the report, but it will show as paid.
Approach Going Forward
Once your historical credit report is accurate, you need to consider your financial behaviour with the objective of being ready for your first home loan.
Utilizing a credit card for your expenditure is a good practice as all transactions are easily tracked and you can use numerous budgeting Apps to keep track that you are on budget.
Your ability to show a higher propensity to save than what is considered average will certainly speak will to your lender and help your application.
Planning for your first home loan is by far a better approach than stumbling along.