Credit Score

8 Tips to Improve Your Credit and Get a Better Home Loan

May 3, 2016 in Credit Score

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One of the first stops on the road to home ownership is figuring out your finances, and that includes understanding your credit – a critical piece of the buying puzzle.

Whether your credit is in need of an overhaul or you’re looking to preserve your stellar score, now is the time to address your creditworthiness so you can position yourself to get the best home loan at the best rate.
A good credit often opens the door to success when it comes to buying a home, and, unfortunately, bad credit can close it.

Whether your credit is in need of an overhaul or you’re looking to preserve your stellar score, now is the time to address your creditworthiness so you can position yourself to get the best home loan at the best rate with the following steps:

1. Get a copy of your credit report
If you don’t have a current one, get your credit report now – you need to be aware that problems exist before you can solve them.

Serious issues, and sometimes even minor ones, can take months to repair. There are a variety of ways to get your report, and you’re entitled to a free one from each of the credit bureaus once a year.

2. Mistakes happen – get them fixed
Every year, a whopping 25% of people who get declined for a home loan had errors in their credit report.
When you spot them, it’s up to you to fix them. Your report should have step-by-step have instructions on how to complete the credit form. Follow them to a T, and keep a good record of your dispute, including copies of any documents you file with the bureaux.

Once you make an initial claim, you should get a response within 30 to 60 days.

3. Stay current – pay your bills on time

It sounds obvious, but if you’re looking to increase those scores over time in a clear and steady upward climb, never miss a payment – ever.

4. Pay over the bottom line

If you think you can get your credit spruced up and ready to go in a matter of days, think again. Even without any dings on your report, you’ll want to make sure all your credit cards are paid up prior to qualifying for a loan, and that requires planning, says Stevens.

Another credit building tip is to always make more than the minimum payments on your revolving credits each month.
A history of minimum only payments is not a positive indicator for anyone reviewing your credit report. Always pay more – even if it’s just a little bit. Not only will you be chipping away at your balances faster, but you’ll save money on the total amount of interest handed over to your bank.

5. Maintain low balances

Some say the best way to keep you score afloat is to avoid carrying a balance that’s over 50% of your limit on each card, so pay those debts down below that halfway mark as soon as possible.

6. Don’t move it, lose it

It is important to pay off the debt on your existing credit card, instead of simply moving it to another card.
The credit card companies have caught on to consumers who try to reduce balances by shifting them back and forth between cards, and while they’ll still let you do it, they’ll charge you a large fee.

Incurring the extra cost is simply not worth the benefit. You’ll pay off debt quicker – and you’ll have less of it – if you just work hard to pay off what’s on the card you already have.

7. Buying a car can put a dent in your credit score

It’s best to avoid any big changes to your finances right before a home purchase. That means no big purchases on credit, like buying a car or charging an expensive vacation.

Any significant buys can alter your financial picture, and banks don’t like to see sudden changes just before approving a loan.

8. Plan ahead

If you think you can get your credit spruced up and ready to go in a matter of days, think again. Even without any dings on your report, you’ll want to make sure all your credit cards are paid up prior to qualifying for a loan, and that requires planning.

Get ahead of the game by paying down your debt, then try and lock up your credit cards until your credit score has been checked and you have been approved for your mortgage. Nothing is more central to your happiness than the spaces in which you live, work and play.

Source: Property 24

The power of your credit record

July 8, 2015 in Credit Score

Keeping your credit record in good shape is of utmost importance to a successful home loan application.

Credit records play an important role in the world of property. It is usually the first thing financial institutions check when would-be homeowners apply for home loans and the first port of call for landlords when assessing potential tenants. As such, it is imperative that your credit record is in good shape if you want to buy or lease a property.

From the moment you apply for your first store card or apply for a line of credit, these details are recorded and kept by a credit bureau. As per the National Credit Act, credit providers are entitled to access this information when assessing credit worthiness. Your credit record will include details such as credit agreements you have with approved financial service providers as well as details such as payment frequency, missed payments, overdue payments, judgements and even your likelihood to ‘squat’.

Albertus van Staden, Head of Credit at FNB Housing Finance explains the importance of a healthy credit record in the context of home loans.

“A home loan is usually one of the biggest investments made in your personal capacity. Banks and financial institutions will look at your individual credit profile before granting you the finance to buy your home. Proving that you can manage your debt obligations responsibly is vital. It is vital to pay bills on time, every time. If you have a neglectful attitude towards your creditors this will reflect at the credit bureau and may mean that you have to wait for your dream home.”

Likewise a poor credit record will reflect badly on any rental application that you make. If you feel that your credit record may get in the way of a rental or home loan application, it’s best to put your application on hold and first clear your record as the chances of being granted a home loan or lease are slim.

It’s possible to check your credit record for free once a year. Thereafter your credit record can be purchased for a minimal fee from the credit bureaus. Doing so will enable you to see whether or not you have any negative points on your record in need of correcting and that your accounts are up to date.

Even if you don’t think your credit record could be held against you it’s a good idea to check anyway. You may be surprised to find that your credit record lists incorrect information which could cause lenders or landlords to reject your application. For instance, there can sometimes be a lag where fully paid debts don’t reflect at the credit bureau. This needs to be updated and a letter issued by the credit bureau proving that the debt in question is in fact settled.

Of course scenarios arise where applications are rejected. If your application is rejected you have the right to ask for a reason. This will enable you to pinpoint exactly where the fault in your credit record lies, following which you can take steps to remedy it.

And what of the credit amnesty granted last year? Those who think their slates have now been wiped clean and can apply for home loans and rentals without any worries need to think again. Although certain allowances were made as per the amnesty, information pertaining to payment profiles and other crucial information didn’t just vanish. Payment profiles record a consumer’s payment pattern and is recorded on a monthly basis which means your credit record could still be used against you if you haven’t kept on top of it.

Source: Private Property (www.privateproperty.co.za)

Bad Debt Is Still Bad Debt

July 16, 2014 in Credit Score

There’s a little bit of bad news for those who have been rubbing their hands in glee at the idea that the recently introduced Credit Amnesty Act will magically make their bad debts disappear – it won’t.

Quite frankly, it’s more than a little naive to assume that the government would provide its citizens with a “get out of jail free” card allowing them to walk away from their responsibilities. And let’s get real here, those who have accumulated the debt need to settle it in full if they want to create more debt by buying a home.

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However, reports have started coming in regarding the small flood of enquiries bond originators are receiving regarding the Act and its implications. The Act has been misunderstood by some people. They appear to think that it exonerates them from paying any debt incurred before 1st April 2014. Such debts, they somehow assume, have miraculously been “written off”.

It is extremely naïve to think that any government anywhere in the world could enact such a law. In fact, it would be the height of irresponsibility to do so.

 

Pay Your Debt In Full

While the Act will not wipe out bad debt, it will assist anyone who has a black mark (a negative report) on their credit record, if this was incurred before 1 April, and who has since paid the debt in full. In such cases, the new Act stipulates the misdemeanor has to be expunged from all South African credit records.

Similarly, anyone who has a court judgment against them dating from before 1 April on account of a debt, and who has since paid the amount in full, must have the record of the judgment with the credit bureau cleared completely.

In addition, it is important to remember that in terms of the Act, the paid-up former debtor is also entitled to have all negative comment on his credit performance deleted from the credit records. In other words phrases such as “slow payer”, “delinquent”, “not contactable” or “absconded” have to be removed and any negative action taken against the debtor, for example “handed over”, “repossessed” or “legal action taken”, also has to be deleted from the credit records – provided that full payment has been made.

 

May Not Help With Bond Finance

In November last year Fitch Ratings, a global rating corporation, stated that the Act would have a greater impact on the non-bank lending sector than on banks, because non-bank lenders are more reliant on credit bureaus, whereas banks can perform more of their credit assessment in-house.

In other words, while the amnesty may help customers open up a new clothing or chemist account, it won’t necessarily help those who have a bad credit history obtain mortgage finance from a bank.

Remember, too, that any negative classifications of repayment behaviour or enforcement actions after 1 April 2014 may and will be reflected on the credit report into the future as the amnesty only covers behaviour and actions prior to 1 April 2014.

 

Five Years Is A Long Time

While in the past judgments were reflected on the credit record for a period of five years and/or until such time as the client had the judgment rescinded by a court, from 1 June 2014 the Credit Bureau must remove the record of the judgment within seven days of the client supplying proof that the debt has been paid in full. The client no longer needs to incur legal costs to bring a court application to have the judgment rescinded and/or removed from his credit record.

It is therefore still important for all credit consumers to maintain regular payments on outstanding debts to avoid any legal action being taken against them as this may well nullify the assistance the amnesty may have afforded him or her into the future.

A reminder to debtors that all South African citizens are entitled to one free credit record per annum. This can be obtained from TransUnion or by calling 0861 482 482.

 

SOURCE: www.privateproperty.co.za