Assess your credit files long before applying for finance for your dream home

Assess your credit files long before applying for finance for your dream home
Nicholas FaillaMay 27, 2020

The time has finally arrived. You’ve been saving for years for the deposit for a home and one day you think “I’ve got there”.

Well before this time you’ve no doubt been looking at localities, services and types of homes and neighbourhoods you like. You may have already inspected a few places knowing that the day was coming closer when you could buy. You may also have started to research which home loan to apply for, interest rates, fees, terms and conditions.

But you may have forgotten one important thing which I encourage everyone to do today; work out the likelihood of your credit application being approved before you face disappointment.

Credit criteria are very tough right now and if you want to get the best interest rate you will need to do some homework on your credit files.

I’m not just talking about your credit score. I’m talking about getting copies of your complete credit file from Equifax, Illion and Experian. And if you are a director of a company, getting those credit files too.

I’m talking about comparing the credit files when you receive them knowing that any prospective lender will be assessing the entire picture and taking into account the worst case scenario.

Things to look for are:

  • High interest (risk) loans you’ve applied for in the past (payday or fast cash loans lower your score)
  • Your shopping habits seen in the enquiries section of your credit file; does it look like you kept trying to get credit and failing because there are multiple similar applications made at a similar time? (more than 5 enquiries per year lowers your credit score)
  • Any defaults and court judgments with paid or unpaid debt attached to them (both paid and unpaid defaults and judgments lower your credit score)
  • Cross-linked credit files (lower your score because it looks like you have other identities)
  • Any incorrect personal information
  • Fraud (entries where you are sure you didn’t apply for particular credit)
  • Amount of credit limits on your credit contracts and how close you are to maximum amounts

Your credit score is based on these factors, and others, and improvements can be made to your credit files if necessary, way before you apply for a home loan. Give yourself 6-12 months to improve your credit score before applying because getting a low interest loan can save you thousands in interest per year and make your life much easier.  

Ways to improve your credit score:

  • Pay down your credit contracts and close any that you can
  • Stop shopping around for credit contracts. If you are rejected, stop and reassess you that might be the case
  • Stop applying for high interest loans
  • Stop using Zippay as it raises a red flag for lenders as they think you can’t afford to pay for what you want
  • Write to the credit providers and ask them to prove they placed your default correctly
  • Write to the credit reporting agencies and ask them to correct your personal information
  • Negotiate with the plaintiff who put a judgment on your credit file, to remove it

There are also ethical companies who specialise in erasing incorrect data from credit files. Shop around for one you can trust and get your credit files into tip top shape so your home loan has the best chance of being approved.

Nicholas Failla

Nicholas is a content writer and graphic designer who is passionate about cities, architecture, urban planning and sustainable communities.

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