Your Credit Score and You
By Kim Wight | blogger and radio finance commentator
Like you, I am a true believer in the great Australian dream of home ownership. Along with this dream there is also what seems like the great Australian pastime of looking at interest rates and what is on offer from all the various lenders.
I want to encourage you to investigate your home loan options but I also want to offer a word of caution as to how you make your enquires. There are things that happen with your home loan application that you may not be aware of.
With so much information on the internet many people can get into a trap of applying for a loan on line with out knowing they are doing it. This can also happen sometimes if you meet with a lending manager in a Branch. Before you know it your details are entered into the lenders computer system, a credit check done and you are told your loan is approved subject to you providing the supporting income and savings evidence.
But you were really only shopping around and wanted to know what they could offer you in a home loan but now you have that loan application recorded against your credit rating.
Most lenders now use an online credit scoring system to assess loan applications. The human personal element has been removed.
Here is a secret the banking industry doesn’t tell you.
Your personal information that is entered into the lender’s online application system is given a “Score” If the score comes in outside the approval score your application is automatically declined. Have you seen Little Britton “The computer says No”? If the computer says no it is very hard to get it overturned.
A reason we are seeing loan application fail is simply too many credit enquires on a client’s report. A general rule is more than 5 credit enquiries on your credit report in a five month period and the loan may be declined.
You might think that five enquiries in that time period is a lot but are you aware of what can appear on your credit report. Any company that is providing any form of goods or service now and payment later will list on your report. You may be surprised to know that your mobile phone provider will appear on your report.
So in a six month period you could have
- Changed mobile phone carriers
- Purchased a new computer using credit from a retailer
- Taken the offer of a new credit card your saw advertised offering a lower rate
- While “shopping” around for a home loan you allowed a credit check to be preformed.
- If you are in business, a new supplier may have offered you extended payment terms. .
What you need to know is that no business can look at or list their enquiry on your report without your permission. They need to have your privacy consent before they can access your file.
There are various ways businesses get your permission
- Signing a consent form
- Giving permission on a online consent form
- Agreeing to a recorded consent message.
To avoid having your loan application declined simply for shopping around I suggest you
- Never give your privacy consent unless you are 100% certain you are going to take the suppliers offer of goods or service.
- When looking for your home loan use the services of a mortgage broker such as myself with experience in the various lenders policies and who can show you home loan products and rates from over 25 lenders.
- Know what is on your credit report which is available to you at www.mycreditfile.com.au.
If you have questions or comments regarding anything covered in this blog please let me know I would welcome your thoughts – just post a comment, question below
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