Many a New Year’s resolution has been declared to take the time to find a home this year, and apply for a loan. If this is you, there are some things you need to know about credit NOW which can help you out massively.
We look at the three things you need to ask yourself right now, that you may not have considered, but which could stop you from getting your dream home.
By Graham Doessel, Non-Legal Director of MyCRA Lawyers. www.mycralawyers.com.au.
Good deposit? Check.
Good income? Check
Paid off most of your debts? Check
Stable job? Check.
Most people who answer ‘yes’ to all of the above questions would assume they’re ready to go for finance and would be any lender’s favourite customer.
If this is you, and you are about to talk to your broker or bank branch about getting a mortgage, there are 3 important questions you need to ask yourself before you do…
1. Have I… disputed a bill with my credit provider/moved/divorced or separated/forgotten a bill/or not received a bill I should have in the last 5 years?
These are probably the most common reasons people end up with a bad credit rating which sees them refused a home loan. Answering yes to any of these questions may mean you are at risk of having impaired credit show up when a lender does a credit check on you.
Your credit provider may have issued a default in your name. If you have moved or separated or due to credit provider error, you may or may not have been made aware of your credit listing. These “oversights” whether yours or theirs may not be easy to remove, and many times clients who request their removal are told by their credit provider they are never removed but can be marked as paid if you settle the account. Unfortunately a paid listing is just as detrimental to your home loan as an unpaid one.
If you fall into the above categories, do yourself a favour and apply to see your credit report before you apply for a home loan (www.freecreditrating.com.au).
2. Do I have a copy of my credit report?
Even if you believe you are not at risk of bad credit, and you always pay bills on time, mistakes can and do happen. Don’t let the lender be the one to see them first, order your own credit report and make sure you have the all clear before you apply. If the lender does a credit check they will generate a “credit enquiry” on your file. If you have bad credit, the credit enquiry will only add to the crosses against your name. So it’s best to check your credit file yourself first, which you have the right to do for free annually without generating an enquiry against your name.
You can order your credit report from Australia’s credit reporting agencies. A free credit report takes around 10 working days to be sent to you by mail. MyCRA Lawyers also offers a credit file analysis service, which includes a credit assessment and same-day copy of your credit file service.
3. Have I paid my credit card or any loan late in the last 12 months?
Hopefully you have checked your credit report and it has come back clear…BUT even still, there may be things you are doing right now which are harming your future credit file. If you have been late making repayments to finance providers on accounts such as credit cards or loans you have been monitored (since December 2012). While this information doesn’t show up on your credit file yet, it will from March due to new credit reporting laws which are set to be implemented then. It will stay on your credit file for 2 years.
If you think you have paid a credit card late, or your personal loan or other finance, then you may be at risk of a late payment notation against your name. If you are a serial late payer, even by a week or so, you are probably at risk of this new type of ‘bad credit’.
Too many may mean you are refused credit after March. If you think this is you, you may need to apply for that loan before March, and not wait, or potentially risk being refused credit, or being offered a higher interest rate.
It’s unclear how lenders will look at these notations – how many late payment notations will be too many and mean you’re refused credit, so take heed, and make sure you stop paying your credit accounts late in the future to protect your credit file.
If you’re not sure where you stand with your credit file, or if there is a ‘black mark’ which will stop you from getting your home loan, talk to us about it. We can assess whether we may be able to help you dispute your credit listing. If successful in proving the credit listing is incorrect or inaccurate, it is required to be removed from your credit file. So you can have the squeaky clean credit file you deserve, and your loan at the interest rates you deserve too. Phone MyCRA Lawyers on 1300 667 218 for more information.
Image: Danilo Rizzuti/ www.FreeDigitalPhotos.net