Know your Credit Score
Lenders use your credit score to determine your credit worthiness. Knowing your credit score, what impacts it positively and negatively and how to improve it is useful. There are three companies in Australia that will provide you with your credit score at no cost.
Experian: https://www.experian.com.au/consumer/order-credit-report
Illion: https://www.creditcheck.illion.com.au/
Equifax: https://registration.my.equifax.com.au/eligibility-reason
For a full explanation of how comprehensive credit reporting works in Australia, look here: https://www.equifax.com.au/personal/what-is-comprehensive-credit-reporting
Financial Records: The Key to Unlocking Borrowing Potential
When it comes to securing a home loan, lenders are keeping a close eye on every detail of your financial situation. So, let’s start by making sure your financial records are in top shape. This includes having up-to-date documentation ready to go, especially if you’re self-employed. Lenders will want to see proof of your income, recent tax returns, and payslips. Having these documents readily available can streamline the application process and improve your chances of approval.
Reducing Expenses for Maximum Impact
Another way to increase your borrowing power is by taking a closer look at your expenses. Lenders will assess your living expenses to determine how much they’re willing to lend you. By trimming unnecessary expenses and tightening up your budget, you can demonstrate to lenders that you’re financially responsible and better positioned to take on a larger loan. If you don’t already, consider using a budget planner. Sticking to your plan, will help you to stay on track. You can access a free one here. https://moneysmart.gov.au/budgeting/budget-planner
Grow your Income
If you haven’t had a payrise for a while, maybe it’s time to ask for a review. You can also consider upskilling to attract a higher salary. Pursue side gigs. Think about whether you have another skill that you can earn some extra money and add all of that to your savings to increase your deposit.
Reduce Debt
Having multiple consumer debts like credit cards, personal loans and car loans impacts your borrowing capacity significantly. Do your best to pay down high interest debt as quickly as you can. It looks good on your credit report and can really hep your borrowing capacity.
Consolidating Debts for a Clearer Path
If you have multiple smaller debts scattered across your credit file, it might be time to consider consolidating them into a single loan. Not only can this simplify your finances, but it can also reduce your overall interest rate and lower your monthly repayments. By presenting a cleaner financial profile to lenders, you can improve your borrowing capacity and pave the way to homeownership.
Managing Credit Cards Wisely
Having multiple consumer debts like credit cards, personal loans and car loans impacts your borrowing capacity significantly. Do your best to pay down high interest debt as quickly as you can. It looks good on your credit report and can really hep your borrowing capacity.
By implementing these strategies and presenting a strong financial profile to lenders, you can increase your borrowing power and take the next step towards homeownership. With careful planning and the right financial approach, that dream home could be closer than you think!
