One thing I’ve learnt in my years as a mortgage broker; a declined application isn’t always a declined application, just like a failed credit score isn’t always the end of the road.
There are several ways to get around a credit score issue – but for this you’re really going to need a good understanding of which lenders credit score, how strict their credit score is, and how each of them work – but prior to all of this, if you can provide the right information upfront you will massively reduce the risk of a credit score issue to begin with.
The more quality and accurate information you provide in your home loan application, the better you’re going to score. It may seem simple, but ensure you list ALL your assets. This includes things you may not think matter – I always list everything from cars, jet skis, caravans, boats, motorcyles, art collections, home contents, superannuation, and most importantly – all transactional and savings accounts.
Some lenders and credit score systems may even automatically decline your application simply because you have not listed a savings account with a valid BSB and account number. In fact, adding this to a declined application can often turn the decline back around into an approval.
Other important information is to ensure you provide a full 3 years employment and a full 3 years residential address history.
Picking the right lender from the word go can dramatically impact on your application. If you are worried about your credit score, there are lenders out there with less severe scoring systems – and even lenders that do not credit score at all. If you’ve already failed credit score elsewhere, then considering one of these ‘no credit score’ lenders may be the way to go as they simply take a common sense approach to lending. Continuing to make additional applications with other lenders at this point may only make things worse.
Although it is worth remembering that it is not just the lender that credit scores your application, but the mortgage insurers too – but no matter how difficult, there is almost always a way.
There are a select few lenders that have what is referred to as a delegated underwriting authority – or ‘DUA’ for short. What this means is that they have the authority to sign off on the mortgage insurance on behalf of the insurer, so although they still insure – the insurance company doesn’t assess your application.
If you’re stuck with a credit score issue, your next stop is likely going to be a lender that doesn’t credit score and that has an internal DUA to sign off on the application. Then it just comes down to simple common sense – does this application make sense and does it fit policy – if so, you’re likely in the clear! Bank policies differ dramatically – where one lender fails to assist you another lender may welcome you with open arms.
Of course there are steps you can take to reduce your overall risk profile, for example;
Don’t make multiple loan enquiries
Be careful with the number of credit accounts you take out – including credit cards, and yes – interest free loans count
List all your assets, including bank accounts with valid BSB and account numbers
Increase your deposit amount – lower LVR’s (Loan to value ratio) are subject to far less strict scoring
Maintain a stable employment profile
Avoid changing employers around the time of your application
Use a mortgage broker to help you select your chosen lender so that you only need to apply once
Credit score isn’t something to be feared, most applications pass and it never comes up, so you’re none the wiser – but it pays to be aware of what it’s all about and how you can pre-empt a positive outcome – take a common sense approach to your financial position and listen to the advice of your mortgage broker.