Despite this climate of uncertainty; the banks are still providing home loans! However, they are very cautious. So how do you ensure that your home loan application will be considered favourably?
1) Reduce Unnecessary Facilities
All credit limits granted, whether used or not, are taken into account when evaluating your affordability. Hence, if you have an overdraft facility that you are not utilizing or a credit card limit of R60 000, where you only need R10 000, reduce them accordingly.
2) Have Some Form of Credit Facility
It is very difficult for banks to assess how you manage your debt if you don’t already have any existing credit facilities. Having no credit will reduce your credit scoring, resulting in an automatic bank system decline. A good bond originator, like Property Factor, may be able to have your home loan application reinstated with a well-supported motivation. However, the banks are authorised to override only a very small percentage of system declines. You do not want to take the chance if at all possible.
3) Pay Your Accounts on Time, Every Time
If your account is due on the 30th of the month, but you are in the habit of paying a few days later. Or one month you pay a double instalment and the next month you don’t pay your account. Your account will reflect as being in arrears on your credit report. Avoid this by paying all your accounts on time, every time! Better still, pay your monthly instalments by debit order.
4) Avoid Bounced Cheques / Debit Orders
If your cheques or debit orders are returned due to insufficient funds, your credit scoring at that particular bank will be adversely affected, even if you sort out the problem the very next day.
When submitting a home loan application to another financial institution, they require 3 to 6 months of personal bank statements. If at the time of your application, your unpaid items are still evident, the bank may refuse to grant you the home loan.
5) Check your Credit Record
Contact the various credit bureaus and make sure that you have not been inadvertently listed. You are entitled to a free report once a year. Immediately dispute any adverse records you don’t agree with and sort out any arrears/default listings.
TransUnion ITC - 086 188 6466
Experian S.A. - 086 110 5665
Credit Information Ombuds - 0861OMBUDS (0861 662 837)
6) Be Proactive
If you suspect that you will be entering difficult times in future, make plans to release the equity in your assets, obtain additional finance, apply to have your existing credit arrangements revised and reduce expenditure. "Make hay while the sun shines", because once you are in trouble, it will be very difficult to convince the various financial institutions that you are worthy of credit.
7) Do Not Apply for Credit for Others
Protect your credit record with every fiber of your being. If a family member/friend does not qualify for credit, they probably shouldn’t have it. Don’t put them into further financial difficulty and run the risk of them not meeting their monthly obligations. How they conduct their financial affairs will directly reflect on you.
8) Don’t Randomly Shop around for Credit
Every time you approach an organisation for credit and they perform a credit check, your credit scoring is reduced. Identifying your specific needs and the retailer/institution that will most likely meet your requirements at the best price and only put through one application.
This is also where using the services of Property Factor when applying for a home loan is beneficial, as we are able to identify which specific bank will grant you the required home loan at the best terms and conditions applicable to you, without having to apply at all financial institutions, negatively affecting your credit scoring.
Most home loan application declines are due to applicants having poor credit records. Prosperity is within everybody's reach, but unfortunately “too many people spend money they haven't earned, to buy things they don't want, to impress people that they don't like” and in the process tarnish their creditworthiness.
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