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Home » Home loan applications…and why slow credit-card payments may come back to haunt you

Home loan applications…and why slow credit-card payments may come back to haunt you

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If you haven’t defaulted on a bank loan or credit card before, your credit history should be in top shape when it comes time to apply for a home loan—right?

I’m sorry to be the bearer of bad news but, these days, that’s wrong. The history your lender now assesses extends far beyond checking whether you’re in the red or the black.

So, getting your credit history in better overall shape will give your loan application the best chance of being approved. There are some simple steps to help you do it.

How lenders assess your credit

Lenders and finance brokers order a copy of your personal credit report from a business such as Equifax or other credit report providers.

Until recently, the lender would check company directorships and the number of finance applications you’d made over the past few years, but also be on the lookout for the major red flags—negatives such as defaults, court judgements or bankruptcies. Most people would have clean slates, so this part of the finance process didn’t affect the outcome, because the emphasis was certainly on looking for major negatives.

Today though, lenders take part in what is known as a CCR (Comprehensive Credit Reporting). And that’s made them more forensic in their assessments and more open to sharing information they have about you.  

What does the Comprehensive Credit Reporting include?

With CCR, lenders now share more information on their clients to the agencies and so anyone accessing the credit reports can now have a clearer picture of how the applicants have conducted themselves financially. 

It will include information such as:

  • Your loan limits
  • Account numbers
  • Monthly repayment conduct (or misconduct)

What this means for borrowers is that how you’re treating your repayments now will affect your chances of a loan in the future.

Get your credit rating back on track

Are you a bit slack making those credit card payments? Are you consistently late getting money into the account that deducts your personal loan payment? Have you been slow to pay off a plan with a buy-now-pay-later app such as AfterPay, Zip or Klano? That kind of tardiness will have real consequences down the track.

So, now’s the time to audit your payments. Draw up a plan, do a budget, or talk to your accountant or financial adviser. Become disciplined not just about the amount you pay, but when you pay.

Reliable and punctual payments are what every lender wants to see in a home loan applicant’s CCR.

Unsure if your credit score is healthy?