Credit scores have changed. But bad scores still wreck your finances

Your credit score has a huge impact on whether you get a mortgage approved and the way it’s calculated has changed.

Once it was just a case of not making too many credit enquires, but now your credit score is influenced by so many things – particularly the way you handle your money.  Here are some ‘dos and donts’ so that your credit history boosts your loan application.

Whenever you apply for a mortgage, banks normally run a credit check on you.  But, today, credit checks are completely different to how they used to be.  Nowadays, banks provide pretty-much live data to each other on all loans you may have – and how good you are a repaying their loans.

The better your loan repayments, the better your credit score.

Comprehensive Credit Reporting has changed many things.  Now banks can see what loans you have with other banks, the balance and your repayments.  Critically, it shows how good you are at making repayments.

Your credit score goes up the more you make your monthly repayments straight away.  Your behaviours now have a bigger impact than how many credit enquiries you have made.

Today, one of my clients has just had a loan declined because they had a poor credit card repayment history (of which I had not been made aware) – the bank could see that they were five months behind on repayments to another bank.

The good news is that I will be able to finance them with another lender (their incomes and savings are strong).

But, the bad news is that they will be paying a much higher interest rate.

Banks are more likely to lend to someone who diligently makes loan repayments – they don’t have to earn megabucks.

I encourage all my clients to get some financial discipline (early on) if they want to get a mortgage.  This includes:

• Knowing when your payments are due (and having the funds available to pay them straight away)
• Only having loan facilities that you need
• Tracking what you spend your money on

Getting finance is complicated and I often spend months coaching my clients before we apply for a loan.  If you want to know more about the steps to finance, please contact me.

For a no-obligations consultation on your home loan needs, please contact Graeme on 1300 30 67 67.