One small debt mistake can cost you a home loan

Franchise owners for Australia’s largest independently-owned mortgage broker, Mortgage Choice, continue to meet people planning to buy property who have no idea their credit file may hold details that will see their home loan application declined.

April 21, 2011

Franchise owners for Australia's largest independently-owned mortgage broker, Mortgage Choice, continue to meet people planning to buy property who have no idea their credit file may hold details that will see their home loan application declined.

Some are unaware certain aspects of their debt history, including bill defaults and applications for loans and credit cards, are on file and made available to lenders and other credit providers.

Mortgage Choice spokesperson, Kristy Sheppard said, “There is still a lack of knowledge about the existence of individual credit files and that one or two debt-related mistakes, such as a missed or late bill payment, are often enough reason for someone to be denied a home loan.”

“Younger borrowers are especially likely to be oblivious to the importance of keeping their credit file clean. Defaults and credit applications are usually displayed loud and clear to lenders researching a potential customer's suitability for and ability to repay a home loan.

“Be aware that if you have been active in applying for credit within the last five years and/or have not met deadlines with bill or other debt payments in that time, you have a credit file. Some records are kept on file for seven years.

“The good news is defaults are preventable in many cases. If you are unable to meet repayments it is up to you to contact your lender or credit provider and make arrangements to pay the outstanding balance before a default is noted on your credit.”

Mortgage Choice suggests these top five tips for keeping your credit file clean:

1.    Understand where your money is going and pay on time. Know your cashflow back to front and ensure responsible payment of your credit cards, bills and personal loans by contributing the funds required before the due date. Make time to monitor your accounts closely and look for any discrepancies. Once familiar, you will understand your spending habits better. Do you know the exact balance of your credit card and other loans, their interest rates and fees? Do you keep utility bills on the top of your ‘to do' pile and file them after paying?

2.    Make it automatic. Missed and late payments are one of the most common defaults on a credit file. Paying bills and minimum repayments before or on time will help prevent unwanted fees. A good way to ensure you don't miss one is to set up auto transfers from your savings account.

3.    Don't go overboard. It is easy to go over your credit limit, miss paying bills or fall into the habit of thinking “another debt won't hurt”. You can quickly lose track of spending and fall behind, which is when defaults appear on your credit file. Have a budget and stick to it. Lost motivation? Consider what life will be like if you can't apply for a home loan or other credit in years to come.

4.    Just say no. Credit providers may tempt you to increase your limit. Resist unless absolutely necessary; don't increase spending simply because you can. If you are only just getting by you should think about reducing your limit until in the clear and perhaps cut up your credit card/s.

5.    Pay more than the minimum. By repaying only the minimum required amount on your credit card or personal loan you end up paying a great deal in interest and may never pay it off. Paying debts off in full or making repayments above the minimum amount and restricting your spending will help ensure you pay your balance off and do not tarnish your credit file.

To order a copy of your credit report visit

Call Mortgage Choice customer service on 13 MORTGAGE. Or, visit or

For further information or to arrange an interview, please contact:

Belinda Williamson      
Mortgage Choice     
(02) 8907 0472

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