FINANCE

MARC HENDRICKS

Western Cape Regional Manager of Rawson Finance

he precise criteria banks use to decide whether or not to approve a home loan are something of a closely guarded secret , but that doesn ’ t mean we are completely powerless to increase our chances of success . Factors like credit ratings are well-known to play an important role in the strength of applications .

There are two sides to a bank ’ s decision on whether or not to grant a mortgage . The first is the risk to the applicant – can they actually afford the mortgage in question . The second is the risk to the bank – how reliable is the applicant , and can they be trusted to consistently service their loan . Your credit rating can be a vital component in satisfying the latter .

There are several ways you can ensure your credit rating is top notch , but beware that minor indiscretions can come back to haunt you as much as two years down the line . Banks take a full twoyear period into consideration when researching your credit history . So it ’ s important to maintain a clean record for as long as possible before you plan on applying for any sort of loan .

Build a credit record ( if you don ’ t already have one )

Not having a credit rating can be almost as much of a problem as a poor credit rating , since banks prefer to lend to applicants with a proven track record of responsible debt management .

No credit record isn ’ t guaranteed to disqualify you from a loan , but a healthy record is guaranteed to work in your favour . I certainly wouldn ’ t advise you go out and get a bunch of credit cards or store accounts for things you don ’ t need , but it might not be a bad idea to use a credit card for essentials like groceries , by putting your cash into the credit card before buying .

Pay on time

Slow payment and non-payment both count against you when you apply for a loan .

You can be considered a slow payer for being as little as a day late , even if it ’ s only once in a while , which is why it ’ s absolutely essential that you pay your accounts on time , to the exact day .

Never let a debit order bounce

Most bond payments are made by debit order , so it ’ s understandable that banks would take a dim view of applicants with a poor history in that regard .

A single bounced debit order can cost you much-needed points on your application , so always make sure you have enough money in your account to cover automatic payments like insurance each month .

Have your salary paid into your bank account

Apart from being the easiest way to ensure you have enough money to cover debit orders , having your salary deposited into your account also establishes a record of your income .

This helps the banks get an overview of your income versus expenses , and assess how responsibly you manage your finances .

Never let your bank account go into overdraft

Even bank accounts with no credit facility often allow a small overdraft to enable payments that exceed your available funds by a minimal amount to be completed without hassle .

Overdrafts are a courtesy service from banks to minimise the inconvenience of realising halfway through a payment that you ’ re R20 short . But it ’ s not something they like to do , and they will very quickly cause a fuss if you don ’ t rectify the matter within days . Any history of overdraft , even if its minor , will be a black mark on your record , so it ’ s always best to completely avoid this option if at all possible .

Of course , being human , it ’ s easy to make a mistake here and there that leaves your credit record less than spotless . Does that mean all hope for bond approval is lost ?

There is always hope , no matter how dire the situation , and this is where a bond originator can really save the day . Not only do we help you build the strongest possible application , but we can personally advocate for you to the bank ’ s decision-makers , explaining the reasons behind any black marks on your record so that you ’ re not unduly penalised for your mistakes .

SOURCES Rawson Finance

32 APRIL / MAY 2018 SA Real Estate Investor Magazine