how to improve your Credit Rating and strengthen your Home Loan application
29 April 2011
The first step to buying your new home is applying for your home loan application. This will be affected quite significantly by your credit rating. There are various factors that can affect your credit rating, all of which you should consider as soon as you begin looking for your ideal home. These things can be reversed but it’s a good idea to start this process as soon as possible so that you don’t lose out on the house of your dreams and make your home loan application difficult.
Before applying for a home loan in Australia you must understand that your credit score will be held against you. This is what the banks and other lenders will review before giving you absolutely anything, even a mobile phone contract.
Credit Card Debt?
For most people, bad credit rating is associated with credit card debt. This is unfortunately one of the easiest ways to fall into poor credit. One credit card leads to another, then another and the next thing you know you’re taking out more cards to pay off old debts. The first step is to stop and assess your finances. Do not take any more cards out if you’re struggling with the repayments of the others. Even as little as a 12 month history of paying bills on time will greatly lift your credit score.
If you have several credit cards and are struggling with the repayments then seek advice. Do not take out another one in order to make the repayments. Consolidate your bills and manage your expenses rigidly for 12 months. Speak to your financial institution about consolidation if you are unsure.
Unfortunately, credit rating is essential for all types of home loans. If you are the type of person who has never had a credit card, a phone contract or any other forms of direct debits, then don’t be fooled into thinking your home loan application will be easy, having no credit is sometimes just as bad as a poor credit rating.
If you have no credit rating then the first step is to take out a credit card and start using it wisely. Purchase a few items each month and pay your bills on time. Try to make the full payment each month for an entire year. This will drastically improve your credit state.
Overdue accounts or unpaid bills you weren’t aware of?
It’s also important to remember that different lenders have different criteria for lending. Obtaining a copy of your credit profile is therefore of paramount importance as it will outline all the ‘black marks’ no matter how small. It could be as simple as you shared a utility bill with an old partner or housemate and they forgot to pay it, or even that the information held in your credit file is incorrect.
You can apply for an assessment of your credit score through Baycorp to see where you fall in the ratings. This is extremely useful as the result will give you detailed feedback of any negative marks made against your name, you can then start working towards clearing this.
As soon as you spot anything like an overdue bill, contact the lender in question and make payment. Your credit rating will be updated within five days of the lender notifying Baycorp Advantage that the account has been paid.
To get a free copy of your file, you'll need to apply in writing (Baycorp Advantage Public Access, PO Box 964, North Sydney NSW 2059) or over the internet (www.mycreditfile.com.au) with the following information for identification: full name, address, previous address (if less than three years at current address), date of birth and driver's license number.
If you would like to apply for a Bankwest home loan then speak to a Home Loan Specialist who will provide you with detailed advice on where your credit ratings fall and the options available to you.
There are various home loan guides online, and the Bankwest website has a vast amount of information on your choices of Bankwest home loans.
You can also visit the ASIC website for the following:
Bankwest responsible lending policy
Whilst most of our customers are able to pay their debts comfortably, in the current environment there is increased pressure on some household budgets. Our responsible lending policy means we have robust and sensible lending criteria to ensure we only lend to those customers who have the capacity to repay their debt. Where a customer subsequently experiences financial difficulty we have a range of options to assist them.