The lending market in Australia is very competitive. There is a large number of institutions and service providers that are willing to assist in the finance approval.
What my experience in this industry has taught me is that not all lenders are created equal. This is actually one of the most important aspects of our role as finance brokers. Understanding the niche policy and guidelines between the different lenders to ensure that our clients loans are being approved. So here is a few tips that I thought I would share with you all.
1. Credit Scoring – Credit scoring is an internal process that is completed by all of the major banks and some of the non bank lenders. Credit scoring is basically points being awarded for the information that is provided in the loan application. As it is an internal process we do not know the exact formula. What I do know is that an increased number of clients in Australia are being declined due to credit scoring. The solution could be as simple as placing your loan with a lender that does not credit score and it will be approved.
2. Defaults on your credit file – Everyone that has applied for credit in Australia has a Credit file. This file keeps a record of all of your credit inquiries and records any defaults and court judgements. Quite often a client is unaware that they have a default on their credit file, so after the application is submitted it is discovered. One of the most common defaults that we come across is telecommunication defaults. Quite often they are from the mobile phones of children of the applicant. It is vital that we know about these defaults up front so that we can place your finance with the correct institution that will improve your chance of loan approval.
3. Keep your credit inquiries to a minimum – If you are thinking about purchasing your first home or looking to refinance in the next few years it is important that you maintain a good credit file. Accepting every random credit card offer that is posted to you will result in inquiries on your credit file, upon you accepting them. As these stay on your file for five years, they can easily build up over time. This will not only effect your “credit scoring” but it will also effect the opinion of a credit assessor from a lender that does not credit score.
4. Keep your savings in a separate account – This is one of my favourite tips for first home buyers. When you have to show “genuine savings” it is a great idea to keep these in a separate account from your everyday spending account. You do not need the prying eyes of a credit assessor looking over your weekend shopping spree at the Myer sales. We need to be able to present the strongest application for you so that you have the best chance of approval. This is especially important for our first home buyers, who have no history of paying a home loan.
5. Upfront Valuations – Knowing the value of the property that you are wanting to refinance will greatly assist with your loan approval. There is no point adding a credit inquiry to your credit file by applying for finance, only to find out that your house valuation has come in lower than expected and your application can no longer proceed. The maximum LVR ( loan to value ratio ) for refinances is 90%. An upfront valuation will save you time and save your credit file from an unnecessary inquiry if the figures do not work out.
Our office has access to Veda to ensure that we can order upfront credit reports for all of your clients. In many cases these issues can be resolved and the required finance can still proceed at a later date.