A poor credit rating can make it difficult to get a home loan, but it’s not just those who struggle to manage their finances that can end up with bad credit. Plenty of circumstances could affect your credit history, from identity theft, illness, divorce, to simply forgetting to redirect your bills when moving house, resulting in missed or overdue payments.
If you’re in this situation, there are things you can do to improve your chances of securing finance to buy a home. From ensuring your credit history is accurate, to looking for alternative lenders that take your individual circumstances into consideration, options are available to help you fulfil your dream of becoming a homeowner. Here are five tips to get you started.
- Get on top of your credit report
The first thing you should do when faced with bad credit is to obtain a copy of your credit report to make sure you’re aware of any negative records against your name. You can access your credit report for free at: https://www.mycreditfile.com.au. You will need your Driver Licence and Medicare number.
Having a copy of this report will help you plan to ensure your ability to obtain credit is improved in the future. Overdue debts remain on your file for five years, but the file will be updated if you’ve paid out the balance of a debt. In addition, lenders want to know what actions you’ve taken to address any past credit mishaps, so it’s best to ensure that any defaults are paid off so they can see you are committed to making progress.
- Shop around
If you have been declined loan with the first lender you tried, don’t give up as each lender has different criteria for applicants. While one lender might look on your circumstances unfavourably, another may take a different view. Many traditional lenders use an automated credit-scoring model to determine whether your loan should be approved. It’s worth considering a specialist lender that will look at your individual application and consider your current financial situation in addition to your credit report. As a Smartline Adviser, I can approach other lenders on your behalf.
Multiple credit applications in a short timeframe can be detrimental to your credit score. Attempting to secure too much credit at one time can give lenders the impression that you can’t handle your responsibly. Hence, it is better to have a Smartline Adviser like me shop around confidentially on your behalf.
- Look for flexible lending products to fit your circumstances
While the major banks tend to have rigid loan assessment criteria, some lenders may offer a different approach to home loan applications and consider your application on its individual merits. If your credit history is the only thing holding you back, you may be able to get a mortgage from a more flexible loan provider.
If you’ve been declined by a lender, or you’re looking to buy a home or refinance and are dealing with an impaired credit rating, give me a call on 07 3139 0242.