How Does Credit History Affect Home Loans?

When you’re ready to apply for a home loan, you may be in for a rude shock. Or, maybe you’ve already experienced this shock and are pondering your next steps.

Yes, we’re talking about home loan rejection.

Why are home loan applications rejected? There are a number of reasons why, including: not having a high enough income, having too many debts and having an unreliable credit history. If you have a bad credit history, don’t despair! You can take steps to improve your credit history and even apply for a bad credit home loan.

if you have a bad credit history it’s still possible to improve your credit history.

If you’re wondering how a bad credit history affects your chances of a home loan, then read on. Or talk to a bad credit home loan specialist to discuss your options on 1300 467 274.

What is credit history and what does it include?

Have you checked your credit history? It may be more detailed than you might expect. If you have, for example, missed paying bills to a credit provider, such as a lender or utility company, they can pass on this information to credit reporting agencies. This means that your report can contain a lot of information about your financial situation, going back a number of years. It’s even possible that you have bad credit and not even know it!

What kind of information is included in your credit history?

• personal details – including your name, date of birth, current and past addresses
• recent or past credit applications – this includes recent home loan applications
• your open credit accounts – this can include loans and credit cards
• defaults and credit infringements – this often includes things like overdue and missed bills
• repayment history – you are considered to have ‘missed’ a repayment if it is more than 14 days late
• other information – bankruptcy, court judgement and debt agreements can be listed for at least 5-7 years.

read more: how much can I borrow with bad credit?

How does a bad credit history affect my home loan application?

A lender will look at a number of factors when processing your home loan application. They will consider whether the credit you have applied for is suitable for your circumstances and whether or not you have the ability to meet the loan repayments.

Some of the factors lenders consider include:

• your credit history
• your current debts
• your income
• your employment history
• your past and current addresses

the ideal candidate, in a lender’s mind, is someone that has low debt, high income and is stable in both employment and place of address.

Realistically, however, the world is not perfect. Many people, at some time in their lives, have missed payments, mismanaged their finances or run into bad financial luck. This bad credit history can have a serious impact on a home loan application, but there are lenders who specialise in providing bad credit home loans.

Read more: how do I know if I have bad credit?

Why do I have bad credit?

If you know or suspect that you have a bad credit history, then you may be racking your brain and wondering why. There could be many reasons why your credit history is less-than-ideal, and often it is a combination of personal and financial factors.

Here are some common reasons why people have a bad credit history:

• missed repayments on current credit accounts, cards and loans
• skipped or defaulted on repayments altogether
• are always late in paying utility and phone bills
• too many credit applications
• previous bankruptcy or debt agreement in the past 5–7 years
• or there may simply be mistakes in your credit file

Read more: how to recover from a bad credit profile

Steps to applying with a home loan on bad credit

if you discover that you have a poor credit history, then you may feel that your dreams of getting a home loan are circling the drain. But, there are things you can do. The first thing is to work out why you have bad credit in the first place. Then you can take steps to improving your credit history and maximising your chances of loan approval.

Here are some tips to improving your home loan chances:

1. reduce your debts
2. save a larger home loan deposit
3. get into good financial habits
4. find a mortgage co-signer
5. be stable in both your employment and home address
6. maintain your current debts

even if you follow the above tips, it may not be enough to ensure that your application is strong enough to get a loan. For instance, a previous bankruptcy will stay on your credit history for years. In these cases, it’s helpful to seek out a bad credit home loan expert who can recommend finance for your situation.

Read more: top six tops to financing a home with bad credit

Contact Rapid Finance for more information about bad credit home loans

still unsure about bad credit home loans? Then give the team at rapid finance a call – they are experts in bad credit loans and will be able to answer all your questions. They can even pick out a bad credit home loan that is matched to your personal circumstances.

Ready? Call Rapid Finance on 1300 467 274 or find out more about bad credit home loans online.