select
|

A good credit profile is key when applying for a home loan

When you finally decide to step onto the property ladder and approach the bank for finance, there are a number of factors that will be considered before your application can be approved.

Banks will generally take into account the location and market value of the property, the deposit you are willing to put down, as well as what you can afford and your credit score.

“Many home buyers don’t realise that a poor credit profile or no credit profile affects the overall scoring on an application, and can lead to a decline, a lower offer on the loan amount requested, or a higher interest rate, as the risk is perceived to be higher,” says Stanley Mabulu, head of sales at FNB Home Loans, official finance zone sponsors of the Property Buyer Show in Gauteng.

Before applying for a home loan, it is essential that you first understand how a credit profile works and whether you have a good or poor one, or if it exists at all.

Mabulu says having no credit record, or a poor one often proves challenging when applying for a home loan. Banks perform comprehensive credit checks on each home loan applicant, as the repayment on a home loan will most certainly be your biggest monthly commitment. They need assurance that you have been keeping up your monthly repayment commitments, as this will be a good indication whether you will do the same on your home loan.

“Consumers are always encouraged to take corrective action on poor credit profiles before applying for a home loan, bearing in mind that certain profile challenges can take anywhere from six months to two years to reflect an adequate improvement. Individuals with no credit profiles are advised to start building their profiles responsibly, without taking on more debt than they can keep up with. For example, getting an account at a local clothing store or applying for a credit card that you then make small purchases with and repay as quickly as possible,’ says Mabulu.

According to the National Credit Act, South African consumers can access free credit profiles once a year from credit bureaus like TransUnion (ITC), Experian, XDS and Compuscan.

“We encourage consumers to take advantage of this and establish if there are any defaults or judgments listed against their names, or if there is any information which has been incorrectly listed on their profiles,” says Mabulu.

Banks also use your credit and risk profile as one of the measures to determine the interest rate that you will be charged on your home loan.

To get this information, a bank normally does an enquiry into a customer’s bureau profile with the written permission from the customer to properly assess the risk of borrowing.

“A first-time home buyer could either have a wealth of bureau information, from which a bank could have an indication of the risk; or have a thin bureau profile, meaning that a bank would not know a lot about this customer. Less information about the customer increases the level of uncertainty on the extension of credit,” concludes Mabulu.

For further information on credit scores, home-loans and other financial products visit First National Bank at the Property Buyer Show Gauteng which will take place on October 28 and 29 at the Sandton Convention Centre.

Visit www.propertybuyershow.com. Tickets cost R80. To book visit https://itickets.co.za/events/385743.html.


  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 15 Dec 2017
      With much still riding on the outcome of the ANC elective conference later this month (16-20 December 2017) which, coupled with the Budget Speech in February next year (2018), will impact on business and consumer confidence and market sentiment in general, it is expected that South Africa’s residential property market will continue to maintain its resilience, reflecting an ongoing healthy appetite for property investment – particularly in major metros and key hubs.
    • 15 Dec 2017
      The City of Cape Town has approved a drought levy and increased water restrictions to level 6.
    • 15 Dec 2017
      Negativity seems to have become the fashion in SA’s real estate industry over the past few months, but while there will be challenges, the property market is not going to “fall off a cliff” in 2018, says Berry Everitt, CEO of the Chas Everitt International property group.
    • 06 Dec 2017
      Homes situated within residential estates have become a more and more popular option across South Africa. There are, however, some emergency situations when heavily guarded access points to these communities can be more of a hindrance than a help.
    • 06 Dec 2017
      The average year-on-year house price growth for this year was likely to be slower than last year, despite year-on-year house price growth accelerating mildly in recent months.
    • 05 Dec 2017
      Located in dynamic and scenic Kenilworth is The Wentworth, a new development exclusively marketed by Greeff Properties.
    • 05 Dec 2017
      Today's rental market is a competitive place, so when you find the perfect spot it can be tempting to just sign on the dotted line and hope for the best. Sadly, there are more and more scammers who are taking advantage of this opportunity to dupe unsuspecting applicants out of their hard-earned cash.
    • 05 Dec 2017
      Gated communities are increasingly popular with home buyers due to the perceived safety these neighbourhoods offer. “These gated communities are popping up all over the country and while they certainly can boost security, a few issues have been cropping up – specifically referring to road usage,” says Bruce Swain, CEO of Leapfrog Property Group.
        
    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