If you’ve ever applied for credit or a loan, you are likely to have a credit report and the information in that report is used by lenders to help decide whether or not you can afford a particular loan, and also how likely you are to repay the debt.
Many people find themselves with a poor credit report based on mistakes and poor decisions made in the past. And being rejected for finance when you’ve found the home of your dreams is a difficult pill to swallow. And even worse, each time you apply for a loan it shows up on your credit score making future changes of getting that loan even harder.
Is Your Credit Report Correct?
There are cases where credit reports have been found to be incorrect, and unfairly preventing applicants from having loans and credit approved. If you believe your credit report is incorrect, you need to check it. You are entitled to check your credit report for free once a year. Things to check for are:
Are your personal details correct?
Is your address up to date?
Are any known debts incorrectly listed or duplicated?
Did you miss a loan repayment but not go 60 days in default?
Has your identity been stolen?
You can also contact one of the credit reporting agencies for a copy of your credit report. At the time of writing this article, the agencies listed by ASIC* are:
Veda Advantage veda.com.au – 1300 762 207
Dun and Bradstreet dnb.com.au – 13 23 33
Tasmanian Collection Service tascol.com.au – (03) 6213 5555
Experian experian.com.au – 1300 783 684
The Report Is Not Good! What Now?
If your credit report is poor, and you are satisfied it is correct, this doesn’t necessarily mean you can’t get approval for a home loan. There are still ways to find a lender who may approve that home loan and see you soon living in your own home……
The Human Touch: Find A Lender Who Does Not Only Use Credit Scores
Most lenders use a computer-based system to determine whether or not to accept your application. In many of these instances, the debt servicing of the application is not actually handled by a real person, it is simply reduced to numbers in a computer system.
To avoid this, you need to find a lender who will assess your application personally and apply a more human approach to the decision making process. And by having a real person evaluate your application, you have the chance to demonstrate that you have resolved any previous financial problems, which a computer program would not consider. Your mortgage broker can assist you in locating a lender in this instance.
Find A Specialist Lender
While many lenders will not approve an applicant with a bad credit report, there are others out there who specialise in this field and who will accept the “risk”.
These specialist lenders are generally more agreeable to accepting the higher risk that comes with clients with a poor credit rating but they typically offer higher rates of interest, or non-standard terms and conditions. Don’t let this put you off though, remember that as your credit score improves, you can refinance to a lender with more preferable rates, terms and conditions.
But beware who you approach in this instance and always have your mortgage broker identify a legitimate and appropriate lender for you to avoid the pitfalls of so-called “loan sharks”, or to avoid being tied into unfavourable terms and conditions.
Please note that this content is general in nature, does not constitute financial advice and must not be relied on when making a financial decision. Before making any decision, you should consult a reputable mortgage broker.
Louisa Sanghera of Zippy Finance is a mortgage broker and is a credit representative (437236) of BLSSA
Pty Ltd. ACN 117 651 760 Australian Credit Licence 391237.