23 November 2011
First home buyers are dipping their feet into the market again – a drop in interest rates and reduced property prices renewing buyer confidence for the first time in two years, but many are missing one vital check to ensure they are finance-ready, the credit check.
The Australian Bureau of Statistic’s housing finance figures for September show the number of first home buyers, as a percentage of total owner occupied housing commitments increased to 16.4 per cent compared to 15.4 per cent in August.
The Real Estate Institute of Australia says although the first home buyer proportion is well below the long-run average of 20.1 per cent, it indicates a modest return of first home buyers to the market.
“The latest figures show that buyers are gradually returning to the market and we should expect modest increases to continue after the decision on interest rates in November which has made housing more affordable for first home buyers,” concluded REIA Acting President, Pamela Bennett.
First home buyers wishing to take advantage of more affordable conditions need to know there is more to applying for finance than wages and savings records.
Director of MyCRA Credit Repairs, Graham Doessel says a borrower’s credit file is one of the key factors to home loan approval, and anyone applying for a home loan should obtain a credit report prior to making a finance application, regardless of whether they think they have a good credit rating or not.
“There are a great number of credit files which contain errors or which shouldn’t be there, and first home buyers need to know any negative listing will stop them from getting a home loan in this market, or force them into a high-interest loan, potentially costing them a staggering $22,000 more in interest over the first 3 years,” he says.*
The term of a negative listing is between 5 and 7 years, depending on the type and can include black marks from telecommunications and electricity providers as well as banks and finance companies.
The most common type of listing is a default, which is recorded if an account is in arrears past 60 days. According to Mr Doessel, defaults from telecommunications providers which are listed in error make up a big part of his clientele.
“As many as 50 per cent of our clients seek credit repair due to bill disputes and internal errors from Telcos that have seen them black listed from credit and unable to get a home loan,” he says.
He says it doesn’t need to be a big default to be a big detriment to a person’s loan application.
“Some defaults for unpaid accounts of $300 can stop borrowers from getting a home loan. Lenders are even rejecting loans for too many credit enquiries, such as two enquiries within thirty days or six within the year,” he says.
House hunters can obtain a copy of their credit file for free every year from one or more of the credit reporting agencies in Australia, and this file will provide details on any negative listings such as defaults, writs and Judgments which may have been placed against their name by creditors.
When disputing a negative listing, it is up to the credit file holder to provide reason as to why the creditor has not complied with legislation.
“Unfortunately many people find this process difficult – negotiating with creditors is not always easy for the individual to undertake. Our job as credit repairers is to check the process of listing defaults for legislative and or compliance errors, any such errors could deem the credit file default listing unlawful, at which time we advise the creditor to remove the default,” he says.
Lisa Brewster – firstname.lastname@example.org
http://www.mycra.com.au/ Stafford Road, STAFFORD QLD. Ph: 07 3124 7133 246
MyCRA Credit Repairs is Australia’s leader in credit rating repairs. We permanently remove defaults from credit files.
* $22,867.15. Based on average loan of $400,000 over 30 years on non-conforming
loan interest rate of 95.% vs standard variable rate of 7 %.(http://www.mycra.com.au/calculators/do-i-need-credit-repair.php)