How to improve the chance of your home loan being approved
You heard how your neighbour/ sibling/ colleague got a great home loan deal by shopping around and now you want the same!
So, you decide on contacting multiple banks to find out what deal they can offer for you to refinance or maybe check how much you can borrow to purchase a property.
Sure, you can submit applications with multiple banks and see which one gives you the best offer. There are two things that you need to consider when you are busily searching for the best home loan from every lender on the main street.
Firstly, the time is going to cost you approaching multiple banks and secondly, the possibility of your action reducing your chances of gaining approval for a mortgage.
While it’s prudent to do your research on how much you can borrow, and which lender provides the cheapest home loan to suit your needs, borrowers should not go through the pre-approval or credit enquiry process simply out of curiosity – as this could lead to a reduction in your credit score.
Seeking a formal pre-approval puts a credit enquiry on your individual client record. If this record shows too many credit enquiries within a short timeframe, then banks will view you negatively as somebody who has been “shopping for credit”.
Lenders review your credit score when assessing your application for finance and they are placing ever increasing emphasis on using credit scoring when considering borrowers applications for approval.
According to Moneysmart.gov.au, “lenders use your credit score to decide whether to give you credit or lend you money. Your credit score is based on personal and financial information about you that's kept in your credit report. Your credit score is calculated based on what's in your credit report. These include;
the amount of money you’ve borrowed
the number of credit applications you’ve made
whether you pay on time”.
All is not lost
A lot of lenders use automated approval process to help reduce the need for manual assessment by a credit officer and if on submission, the algorithm flags excessive credit enquiries, it classes the application to be of low quality and gives it a low score, leading to an automatic decline.
Borrowers who receive decline notices often want to know how they can improve their credit score. While the credit reporting agencies don’t tell us what exact factors are used when determining a person’s credit score, there are some basics that everyone can do to ensure they have the best credit score possible.
One of the best ways to avoid multiple credit enquiry hits on your report is to use a mortgage platform like loansHub. When applying with loansHub, you will receive personalised offers from multiply banks without any negative impact on your credit score.
Other fundamentals you should work towards are having a sound level of assets and maintaining a good length of employment or continuous employment.
One last thing, avoid applying for or accepting offers for unsecured debt facilities such as personal loans, buy now & pay later facilities and credit cards and ensure that you make timely repayments on all you existing debt to improve your credit score and chance of home loan approval.
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This article via Your Investment Property does not constitute advice; readers should seek independent and personalised counsel from a trusted adviser that specialises in property, a tax accountant and property design specialist.