With mortgage interest rates at record lows, there has never been a better time to buy a first home, upgrade or refinance a current mortgage.
Yet, a poor ‘credit score’ caused by a misinterpreted transaction with a betting agency, the repayment of some cash to dad could be holding you back from taking your next step on the property ladder.
A poor credit score along with a decision to take a loan pause on a mortgage or car loan last year due to COVID or taking some super through the government’s early release program could in combination cause a lender to take a dimmer view on a mortgage or refinancing application.
A credit score is a vital sign of your financial health, and a low rating could see you turned down for a mortgage or a refinance. Yet, a recent industry survey found that a total of 73% of respondents either did not know their credit score or were unaware credit scores existed.
Keeping your score healthy by being credit smart will make you look better to a lender when you front up for a mortgage or to refinance. For what it’s worth, credit bureaus such as Experian, Illion or Equifax keep tabs on your score. They also use different grading criteria with a score over 700 with Experian considered “great”, while Equifax might deem it a “good” score. While this can cause some confusion for a borrower, a finance broker can help you navigate the credit score maze.
Dealing with black marks
Your credit score could be dragged down by a large credit card debt or a gas bill that is still unpaid many years later. If you have some blotches on your credit score, a finance broker such as Our Broker works with credit repair specialists that collaborate directly with the lenders to purge the black marks from your credit history. Alternatively, Our Broker can find you a lender that is more flexible about minor indiscretions on your credit file.
You can also do your bit to protect your credit score. For example, make sure you have no overdrawn transaction accounts or that your credit cards are paid on time and are never over the limit. Also, don’t miss direct debit payments by ensuring your transaction account always has sufficient cash flow.
Your transactions mirror your ability to service debt
Lenders sift through your transaction accounts and credit card with the finest of fine-tooth combs. The banks generally want to see six months’ worth of transaction statements before lending you money. So, be accurate about your transaction descriptions, avoid labelling transfers from your transaction account to friends or family members as loans or repayments when you may have been paying for your part of a restaurant bill.
Likewise, if your sister is getting married or having a baby and you are saving for a dress or a gift, be aware that a transaction labelled as “wedding savings” or “baby savings” may indicate that there are large expenses on the horizon or that you has plan to leave the workforce.
Similarly, if you are in a punters club, don’t volunteer to place the pooled bets on behalf of the ‘syndicate’ with a betting agency. This activity might indicate a more significant gambling pattern than you have and could affect your borrowing capacity.
Be aware that a loans officer will be reading your statements and that he or she won’t know your personal situation in detail. Therefore, keep your descriptions accurate and concise to avoid any potential confusion.
How can a mortgage broker help?
As part of our compliance processes, we check your bank statements to ensure they are acceptable to the bank before we lodge your application. If there are some black marks, we can advise you if these issues will affect your ability to borrow – we can also assist you in managing any account anomalies. We confirm you have disclosed all your liabilities, help explain any unusual transactions and prepare a home loan application that will enable you to obtain the best possible outcome from a lender.
To find out more about your credit score and how it may impact a mortgage application, contact Our Broker on 1800 913 677 or email us at [email protected] to make an appointment.