With most lenders looking closely at the credit history and worthiness of any potential borrower, it is important that those seeking finance are aware of the value of a clean credit report when making application for finance.
A clean credit file is important for all buyers, but more importantly it is vital for those with low deposits and, in particular, first home buyers. Your credit file is a recorded history of your personal details, including details of credit applications made over the last 5 years, and also any payment defaults or overdue bills that you may have missed over time. Small payment defaults such as Telco payments or rental arrears can be recorded against your file and will remain for a period of up to 7 years, even if they have been paid.
Lenders can obtain a copy of your credit file to help them assess your finance application. A clean credit file will definitely improve your chances of obtaining that all important finance approval, whilst any negative findings on your credit file can severely affect your application. You can obtain a copy of your own file online through www.mycreditfile.com.au or www.checkyourcredit.com.a
Lenders will also look at the number of credit applications you have made over a period of time- usually the past 12-24 months. Numerous enquiries over a short time triggers alarm bells, especially for those lenders that use a point score (or credit score) automation assessment system. You should avoid making applications to numerous lenders in the hope of one lender approving your application.
Your credit rating should be treated with utmost importance - in fact, it could be your best friend when it comes to obtaining finance. An impaired credit rating may, or may not preclude you from obtaining finance. You may be able to get an approval, but at a higher rate with higher fees than those with a clean credit file. The price reflects the lenders risk.
Before obtaining any finance, you should speak to your finance broker to discuss your position and ensure that you don’t jeopardise your chances of getting your loan approved.