One of the revelations of the Royal Commission is how poorly and inefficiently banks are recording living expenses on loan applications.
Changes to the categorisation of living expenses and how they are assessed is having an impact on the borrowing capacity of many aspiring homeowners, investors and mortgage holders who wish to refinance.
These developments combined with the recent rollout of Comprehensive Credit Reporting (CCR) – which gives lenders a more detailed look into your credit activity – means people applying for loans have more to think about before they apply.
For the two reasons above, applications which may have been approved previously are now being declined. If you have been declined and you are not sure what to do next, these quick tips may help!
1) Find out why you were declined
If you applied directly with the bank or a broker, ask them why you were declined. If you ask they must give you an indication. Maybe there was something on your credit file that you simply weren’t aware of? Being aware of why you were declined may help you tidy up your finances for future success. Lenders may not be specific when asked “why” and they may answer with “your credit score is too low or something similar.” Contact us and maybe we can review your situation to let you know what may be the issue.
2) Don’t apply again straight away
Have a conversation with a bank or broker before making another formal application. Ask them if it’s better to wait for a period of time before applying again. Each time you apply and get declined your credit score can be impacted negatively. Sometimes waiting an extra three months can be beneficial in the long run. Talk to us, we can have a look at your situation.
3) Consider a specialist lender
We constantly see advertising from the big banks, but did you know there are many specialist lenders who have more flexible lending criteria and offer alternative finance solutions? A specialist lender can be useful when you have a low credit score or if you have faced hardship in the past. A Mortgage Broker can help guide you through this process. Brokers like us work with many lenders, not just one.
Getting declined can be disappointing and put a hold on big life plans. The more informed you are the better your chances are for success. If you have any questions – we’re here to help!