select
|

Five ways to maximise your credit rating

The precise criteria banks use to decide whether or not to approve a home loan are something of a closely guarded secret, but that doesn’t mean we are completely powerless to increase our chances of success. Factors like credit ratings are well-known to play an important role in the strength of applications. Marc Hendricks, Western Cape Regional Manager of Rawson Finance – the Rawson Property Group’s in-house bond originator – explains why this is, and shares his top tips on achieving a spotless credit record to get the best possible home loan offer.

“There are two sides to a bank’s decision on whether or not to grant a mortgage,” says Hendricks. “The first is the risk to the applicant – can they actually afford the mortgage in question. The second is the risk to the bank – how reliable is the applicant, and can they be trusted to consistently service their loan. Your credit rating can be a vital component in satisfying the latter.”

There are several ways you can ensure your credit rating is top notch, but Hendricks warns that minor indiscretions can come back to haunt you as much as two years down the line.

“Banks take a full two-year period into consideration when researching your credit history,” he explains, “so it’s important to maintain a clean record for as long as possible before you plan on applying for any sort of loan.”

To help you do just that, here are Hendricks’ top five tips.

Build a credit record (if you don’t already have one)


Not having a credit rating can be almost as much of a problem as a poor credit rating, since banks prefer to lend to applicants with a proven track record of responsible debt management.

“No credit record isn’t guaranteed to disqualify you from a loan, but a healthy record is guaranteed to work in your favour,” says Hendricks. “I certainly wouldn’t advise you go out and get a bunch of credit cards or store accounts for things you don’t need, but it might not be a bad idea to use a credit card for essentials like groceries, by putting your cash into the credit card before buying.

Pay on time

Slow payment and non-payment both count against you when you apply for a loan.

“You can be considered a slow payer for being as little as a day late, even if it’s only once in a while,” says Hendricks, “which is why it’s absolutely essential that you pay your accounts on time, to the exact day.”

Never let a debit order bounce

Most bond payments are made by debit order, so it’s understandable that banks would take a dim view of applicants with a poor history in that regard.

“A single bounced debit order can cost you much-needed points on your application,” says Hendricks, “so always make sure you have enough money in your account to cover automatic payments like insurance each month.”

Have your salary paid into your bank account

Apart from being the easiest way to ensure you have enough money to cover debit orders, having your salary deposited into your account also establishes a record of your income.

“This helps the banks get an overview of your income versus expenses, and assess how responsibly you manage your finances,” says Hendricks.

Never let your bank account go into overdraft

Even bank accounts with no credit facility often allow a small overdraft to enable payments that exceed your available funds by a minimal amount to be completed without hassle.

“Overdrafts are a courtesy service from banks to minimise the inconvenience of realising halfway through a payment that you’re R20 short,” explains Hendricks, “but it’s not something they like to do, and they will very quickly cause a fuss if you don’t rectify the matter within days. Any history of overdraft, even if its minor, will be a black mark on your record, so it’s always best to completely avoid this option if at all possible.”

Of course, being human, it’s easy to make a mistake here and there that leaves your credit record less than spotless. Does that mean all hope for bond approval is lost?

“There is always hope,” says Hendricks, “no matter how dire the situation, and this is where a bond originator can really save the day. Not only do we help you build the strongest possible application, but we can personally advocate for you to the bank’s decision-makers, explaining the reasons behind any black marks on your record so that you’re not unduly penalised for your mistakes.”


  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 23 Nov 2017
      Reserve Bank Governor, Lesetja Kganyago, said that the Monetary Policy Committee had once again decided to let the interest rates remain unchanged with the repo rate at 6.75%, and the prime lending rate at 10.25%.
    • 23 Nov 2017
      As the holiday season approaches, most of us are counting the days until that year-end bonus hits our account. There’s nothing quite like a little bank balance booster to get us in the holiday spirit.
    • 23 Nov 2017
      The Adelphi Centre (now entitled “ARTEM") in Sea Point, Cape Town, is being extensively renovated, and once complete will offer an ultra-luxurious galleria style shopping centre unlike any other seen on the Atlantic Seaboard or in Cape Town.
    • 23 Nov 2017
      If you are looking to sell your home in today’s real estate market, there are certain things that you need to include both inside and outside your house. Today’s generation of home buyers is looking toward a more eco-friendly, energy and water conscious home, and if your house stands out then you are more likely to be able to sell it.
    • 22 Nov 2017
      Most people know of the Community Schemes Ombud Service (CSOS) and that levies must to paid to fund its operations. In this article the experts at Paddocks will address some of the issues that are causing confusion.
    • 22 Nov 2017
      While sales have noticeably slowed in most sectors in most Cape town suburbs, the security estate sector in Constantiaberg has bucked the trend by remaining buoyant, with sales by August this year already surpassing total sales in 2016.
    • 22 Nov 2017
      The end of the year is fast approaching, and so are all the travellers, tourists and holidaymakers. For those who live near or own a property in a holiday-hotspot, the festive season also brings with it an abundance of short-term rental opportunities. Its a great way for property owners to make a few extra rand for their own holidays or to put towards their savings.
    • 21 Nov 2017
      The buying process is over, and the moving truck has delivered your household goods to your new property. Now it’s time to unpack and turn your new house into a home.
        
    X
    Subscribe to the MyProperty Newsletter

    Name  
    Last Name  
    Email Address  
    Email Frequency
    select
    X
    Share this Page

       
    For Sale Property
    Rental Property
    More Options
    About
    Connect with us
    FEEDBACK