For starters, bank personnel did not met the borrower and the emphasis was on whether or not you had any credit defaults.
If you had no defaults because you had never borrowed money it was no big deal, the main priority was that you did not have any defaults.
In recent years, however, with the move towards automated credit scoring by computer programs, it now means that the lack of a previous credit facility can actually work against you.
“Computer programs are essentially doing what the humans used to do – making a value judgement on your past performance and assessing your character,” says Joe Sirianni, executive director of Smartline.
Sirianni says he is not asking people to take on lots of debt and it’s definitely not the only way to give yourself the best chance of securing a home loan.
“But if you’re planning on taking out a $5000 car loan or a $2000 credit card for your overseas holiday anyway, it certainly does help the cause.
“It might even be as little as a credit card with a $500 limit that you’ve kept in good order – that would be all you would need to do well on the credit score.”
Here are Your Investment Property’s top tips for getting finance:
- Get your financial house in order.
- Be very conscious and look after your credit rating.
- Pay all your bills on time, particularly bank bills like credit cards and loans.
- Ensure your savings account doesn’t get overdrawn. “There have been many cases where I have had a lot of difficulty getting loans approved with the most suitable lender for a client because of small things like late payments or overdue accounts even for only a day or so,” says Garry Harvey, a winner of Your Investment Property’s Investor of the Year award. “Do whatever you need to do to put a system in place to pay everything on or before the due date every time.”
- Review the structure of any property debts you have. Sometimes a barrier to accessing more finance can be the level of your monthly repayments on your existing debts says Harvey.“The lower your existing monthly finance commitments are the more funds you are likely to be able to access for the next deal.There is no silver bullet here but a holistic approach to your entire financial situation is the best way to ensure you can move forward and start hitting your goals and ultimately achieving your investment objectives,” he says.
- Reduce your credit card limits.
- Make sure all your loans are interest only.
- Avoid being a guarantor for anyone’s loan.
- Avoid buying property with someone else.
