This is a record of your credit history over the last 5 years. It lists any loan enquiries or applications (hits) you have made.  As the saying goes, some people have more ‘hits’ than Elvis! So, how is your credit rating?

Also, a credit rating will note if you have failed to pay any loans, credit cards or bills on time (defaults).  Finally, it will show if you have been declared bankrupt.  Believe me, people are often shocked when they see just how much information is recorded about them.

HOW GOOD DO YOU LOOK TO LENDERS?

Whenever you apply for finance of any kind, the lender will always consider you as a potential risk.

Every lender will conduct a credit report check and consider how large that risk is by looking at what they term as the 5 C’s.

WHAT ARE THE 5 C’S?

  1. Capital: this is an assessment of your current financial position
  2. Capacity: your ability to repay the loan
  3. Character: not your personality, but your financial stability, history and reliability
  4. Conditions and Common-sense: The current environment that is likely to impact you ie. Industry/economic conditions
  5. Collateral: security that is going to be pledged to support the loan ie house, car

THINK LIKE A LENDER

Before you apply for a loan, look at your financial situation. Most importantly, know your income and your expenses.

Ask yourself:

  • Is my employment permanent?
  • Has my employment been stable?
  • Do I have a good savings history?
  • Have I paid my debts on time and according to the contract?
  • What am I wanting to purchase?
  • Am I able to comfortably repay the loan?

REVIEW YOUR CREDIT REFERENCE.

Your credit reference is available for you to purchase on-line.  

If your credit reference is not great, this could affect your ability to borrow money.  Each lender has its own credit policy in relation to defaults, arrears and unpaid debts.  

Be honest and upfront with your broker and lender from the very beginning rather than waiting for them to raise it with you.

Unresolved issues are often able to be rectified.  Therefore, pay any debts you can so you can advise the lender that you have addressed the issue and can show that you have done your utmost to honour your contract.  Doing so may give you a few brownie points.  

Sadly, not all things can be forgiven.  Don’t lose hope though, it does not necessarily mean that you will not be able to get a loan.  Speak to your mortgage broker about your credit rating and they will probably be able to find a lender to help you through.

ANOTHER THING TO THINK ABOUT.

Do you have a positive nett asset position?  In other words, are your assets worth more than your debt? 

Of course, that is our first financial goal.  No debt is our eternal financial goal! 

Now get to work and make sure you look fabulous when you submit your next loan application!

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