Lots of things can affect someone’s credit history, getting sick, redundancy, divorce, forgetting to redirect bills if you move, or just an accidental slip on timing can mean late or even missed payments.
If you have credit issues from these sorts of situations there are things you can do to help your chances of buying or refinancing your home.
Here are five tips to help you get back on top.
1. Get your credit report under control
The first thing you should do if you do have credit problems is get a copy of your credit report - to make sure you are aware of all the problem records you might have against your name. The easiest way to do this is to go to Equifax and request a copy of your report. You can also register with them for a small monthly fee so that you get notified anytime your credit report is changed.
Knowing exactly what’s in your report means you can then make a plan to sort things out. Debts that are overdue will stay on your file for five years, but the good news is that your credit file can be updated if you pay out the balance of a debt.
If you have credit issues then potential lenders will want to know what actions you’ve taken to address those problems, so it’s best to get any defaults paid off so they can see you’ve made good progress.
If any information on your file is not accurate, make an immediate request to have it corrected so it doesn’t continue to affect your home-buying plans. If you think there’s been an error speak to the credit reporting agency and the credit provider involved to get it sorted out. If that doesn't work then you can engage a reputable credit repair lawyer to help you get them removed.
2. Shop around more
If your credit file got a no with the first lender you tried, there are others you can
approach; each lender has slightly different sets of boxes to tick. So if one
lender didn’t look on your situation favourably, don’t give up - another might well
take a different view.
EXTRA HOT TIP: Shopping around is a smart thing to do, but it’s important to
remember that multiple credit applications can be bad for your credit score. So, it’s best to be cautious and only apply for one type of credit at a time. Working with someone like us will help you avoid these traps.
3. Explore the world of alternative lending
If your credit history is the only thing holding you back, you might be able to get
a mortgage from a non-bank lender with a more flexible lending product.
The banks tend to have very fixed home loan assessment rules and policies. Once upon a
time they were pretty much the only option.
Thankfully the world has moved on and with more than 50 lenders available to us we will find one to help you. There are alternative lenders like Pepper Money who offer a different approach.
Alternative lenders consider your application on its individual merits and look at a
wider range of things not a narrow set.
4. Make sure you are in a situation to afford the repayments
A non-bank lender is still responsible with their lending practices, they’ll want to be sure you are in a situation to comfortably manage the repayments.
You need to likewise be comfortable that the proposed repayments. So that they won't be a big a stretch, take into concideration what would happen if rates went up, as they always do. No one wants you to be in hardship.
5. Look at alternatives to Lenders Mortgage Insurance (LMI)
If you’re trying to buy a home with a deposit of less than 20 per cent (which is most of us) you’re likely to find you'll be charged for something called Lenders Mortgage
Insurance (LMI).
It covers the lender if you were to miss payments down the line. LMI providers are a separate business and have their own lending rules – so they’ll consider every application as carefully as the main lender sometimes more carefully.
They may turn down a LMI application because of credit history or income source. Even
when a lender has given an approval.
A different way of doing this, is rather than using a third-party mortgage insurer,
some lenders – can offer a Lender Protection Fee (LPF). This gives them the flexibility to assess your loan without having to get outside approval from LMI providers.
We understand that it's a minefield out there, and how hard it would be to understand what every banks policies are. That's why we are here. If you’d like more information, talk to us today about how we may be able to find a lender that can help you and your situation.
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