How a good credit record can positively impact your home loan approval

If you’ve been diligent about paying off your retail accounts and study loan, you have a better chance of having your home loan approved.
A good credit record is essential when banks look at the financial history of a client,” says Kay Geldenhuys, Property Finance Processing Manager at ooba, South Africa’s largest bond originator. “When banks look at a potential home buyer’s profile, they check their credit history and risk profile to be certain that they can afford the monthly repayments and that they have a record of paying back credit responsibly so that the banks’ investment carries the minimum risk.
When Mary completed her Law degree, she decided to plough as much of her salary back into paying off her student loan as she could afford. “Being headstrong about settling the debt definitely paid off when I decided to purchase my first home and was put through the rigours of a credit check to see whether I’d be a safe bet for a home loan.”
Mary was diligent in ensuring that her debt repayments were always up-to-date, “I’d seen from friends that not paying an outstanding debt can really hinder one’s credit record. They’d sometimes pay later than the instalment due date or pay a bit less, but this really damaged their credit record.”
Few consumers realise that a default on any debt repayment may be reflected in one’s credit rating. Settling an outstanding debt does not automatically guarantee a favourable credit score as the repayment history of a debt remains on the consumer’s credit record for two years.
“One of the golden rules about credit is that you can’t get it until you’ve had it,” says Geldenhuys, “While it may seem financially responsible not to get into debt, the banks have no other way of assessing what you will do with credit. “So proving one’s future credit-worthiness by having some existing debt is useful; however, paying these debts off responsibly, on time and at the correct monthly instalment, or even a little more, is the most important factor.”

Ideally, consumers should educate themselves about their credit rating and apply for their free report annually. “There are 11 registered credit bureaux in South Africa who can provide assistance,” says Geldenhuys. “But remember that a home buyer needs to maintain their good credit rating even after their bond is approved. If their credit rating goes bad before a transfer takes place, the bank has the right to withdraw their offer of home loan finance.”
To afford her new home and be certain that she’d never drop the ball with her finances, Mary also drew up a budget to help manage her money so she always knew what she could responsibly afford on credit. “It sounds boring, but the discipline gave me the joy of a clear conscience, and a clean credit rating,” she adds.

  Comment on this Article

  Please login to post comments

Post to my facebook wall
Characters remaining

    Latest Property News
    • 22 Jun 2018
      The rental market in many Johannesburg suburbs has shown encouraging signs of revival this year but it remains a competitive market and landlords who best cater to their market’s needs will reap the healthiest returns.
    • 22 Jun 2018
      Home design is constantly evolving to reflect the changing needs of society. We look at some of the ways in which our use of space is changing.
    • 22 Jun 2018
      While estate agents can help the seller with correctly pricing the property and marketing a property to the right pool of potential buyers, at the end of the day it’s the impression that the property will make on buyers that counts the most.
    • 21 Jun 2018
      Anyone who’s ever been involved in a building project that’s gone wrong will appreciate the importance of adequate insurance cover in the construction industry.
    • 21 Jun 2018
      A recent news story about a blind tenant caught in a legal battle with his body corporate over letters and notices he was unable to read and consequently comply with has raised the question: what are the legal obligations for landlords with disabled tenants?
    • 21 Jun 2018
      A trend that’s taken the world by storm in recent years is that of hygge (pronounced: hue-guh), a Danish concept that is about creating intimacy, connecting with loved ones and taking pleasure in small, ordinary things.
    • 20 Jun 2018
      Buying or selling real estate isn’t as easy as it is portrayed sometimes, especially if there is a death of a party during the transaction which can make it awkward, tricky and inconvenient.
    • 20 Jun 2018
      With interest rates remaining at historic lows and banks continuing to compete for mortgage finance business, first-time buyers with funds at their disposal are currently well-placed to gain that initial foothold on the property ladder, particularly in the light of the slightly lower growth rates currently experienced in residential property values.
    Subscribe to the MyProperty Newsletter

    Last Name  
    Email Address  
    Email Frequency
    Share this Page

    For Sale Property
    Rental Property
    More Options
    Connect with us