In life we can experience periods of financial hardship, often a result of significant events such as unemployment, sickness or a business downturn. This may make it difficult to meet your current loan repayments and you may fall behind, which can affect your overall credit rating and credit score.
There is a broad spectrum of what a Lender would classify as ‘poor credit’; ranging from a small number of recently missed payments, all the way through to Bankruptcy. But poor credit needn’t be a permanent label to your credit worthiness, and there is much support now from business and the community to help guide you through these difficult periods.
You need to consider your current position carefully and develop a strategy to guide you through the financial issues you are experiencing. Part of this strategy will involve reaching out to professionals in the industry, such as Finance Brokers, Accountants and Financial Counsellors. Most Shire Councils have free financial counselling services available to their constituents.
It may seem overwhelming at the time, but these professional advisors will be able to guide you through the complexities of ‘righting’ your credit history. It may not be an immediate resolution, but you need to start the process, and what may take some time will eventually lead to a positive outcome.
Finance brokers are a great place to start. They understand how your credit history impacts your creditworthiness, and they can help liaise with your current lenders. Although most brokers are not authorised to provide financial advice under their Credit License, they will be able to provide specific credit advice and refer you to trusted advisers who can provide more specific financial advice if necessary.
Our recent blog on credit repair discusses further how you can begin the process of improving your credit history.
If this is the first time you are applying for credit since your credit problems have been rectified, here are some tips on what steps you will need to take to help you get a loan:
If your past credit issues are still reflected on your credit report, then the lender may ask for 90 days of bank statements to review your spending patterns. Bank statements can provide a very good snapshot of your spending patterns. Lenders like to see good savings patterns, consistent income credits and timely repayment patterns of existing loans. They do not like to see dishonours, overdrawn accounts or poor spending habits such as pay day lender payments or regular gambling.
Fully disclose all debts
If you have existing loans or creditors, disclose these at the time of application. Non disclosure of loans will impact your credibility. it is best to be honest and upfront with your Broker and the lender.
Save a deposit
A deposit may be required by the lender as a sign of commitment on your behalf. It could be a small deposit, depending on the asset you are purchasing, the level of lend and your current circumstances.
Be realistic with your purchase level
A lender may be willing to provide you with finance for your next purchase but the level of lend needs to be realistic. You will need to prove yourself again in the short term. This is the path to rectifying your credit issues, Your finance broker will help guide you on the level of lend that they feel is realistic for your circumstances.
Clear as many bad debts as possible
Any debts still reflected on your credit file are better removed, cleared or repaid. If you are a discharged bankrupt then these may be cleared as part of the bankruptcy but may still remain on your credit file for some time. Bankruptcy can remain on your credit file for up to 7 years, however most lenders will consider your application, if you are discharged for more than 12 months.
Expect a higher interest loan
A lender applies higher interest rates to higher risk applicants. If you have had previous credit problems, then it is likely your first loan could have a higher interest rate. This is why it is important to be realistic with your purchase level, and keep it to a minimum. When you have had 12 months of good conduct on your first loan back after credit issues, then look to upgrade or increase your purchasing level. Remember, this is a pathway back to credit normality.
The team at yesapproved.com.au will always work in your best interests and guide you through the process of repairing your credit history. Call us today on 08 9304 2010 or enquire below.