Before a bank will lend you any money they have a duty of care to make sure that you’re considered to be a “good risk” – especially if you’re trying to secure a mortgage.
So what are the red flags that lenders look for?
- Given that we’re fresh from Melbourne Cup Day, gambling is a huge red flag. So if you like a bet on the horses or a game, you might need to take a break for a period before you apply for your loan.
- Afterpay debt – this shows that you buy on credit rather than with cash on hand, so it’s a concern if you have regular or large Afterpay payments.
- Credit card debt – do whatever you can to pay your credit card off before you apply for a loan. Also, if you have access to say $5000 on a credit card, lenders see that as a $5000 liability regardless of the balance on your account. if you have three cards with $5K credit, that’s $15K liability! If you have the ability to reduce credit limits, that’s always a good idea.
- Personal loans – again, pay them off asap or at least make every payment on time.
- Late payments of bills. If you miss the due date for your electricity bill, phone bill or any other bill, this can be flagged on your credit rating – so be diligent with paying bills on time.
- Applications for credit. Every time you apply for a loan or a new credit card – whether it’s successful or not, it’s recorded onto your credit rating. So don’t apply unless you have your ducks in a row and are confident of success.
If you’re getting yourself organised to buy a new home or investment property, it’s always good to do some “financial housekeeping” during the 3 month lead up.
Please get in touch if you want to chat about your circumstances and how you can prepare yourself for success.
