Is owning a house a distant dream for you? Was your home loan rejected because of bad credit history? You are not the only one. An unforeseen situation or factors in your personal and professional life – self-employed status, lost job, separation, divorce or illness – may result in missed financial payments.
It’s not all bad news though, if you have ended up with a little black mark next to your credit history. You still have a chance to apply for a home loan, provided you work towards improving your financial landscape.
How do you get bad credit?
You get bad credit when your credit file indicates some negative information related to your credit history. This hinders your application process, especially when financial enquiry leads to information on missed payments or overdue debt.
Some examples include:
- Unsettled bills.
- Missed or late payments.
- Loan or credit application rejections.
- Any state of insolvency or bankruptcy.
What are your best home loan options if you have bad credit history?
It is best to first take a stock of your situation. Once you know where the gaps or problem are in your credit history you can work on fixing them. Start with sourcing a free copy of your credit file through www.mycreditfile.com.au and review your credit history
Next, take steps towards settling your outstanding debts. Try to get a stable job and show ongoing monthly income. Create a budget and follow it. If you can save up for a deposit, nothing like it. Keep track of how much money is being spent and saved. This helps show your lender you are serious about it. Plus your credit file looks better than it did before!
Avoid frequent loan enquiries if you have already been rejected a few times. It is best to hold back and build some savings before you approach lenders again. Be realistic about your situation and get some outside help. You can go for financial counselling or enlist with a credit repair service.
- Build up your credit score in six easy steps
- First home buyer checklist
- How to use a mortgage calculator
When you are ready, you can look for lenders who specialise in bad credit home loans. Bear in mind that these lenders charge high interest rates in return. Be transparent about your bad credit history with your vendor. Share correct information. Give a thought to Lender Mortgage Insurance – some lenders use them, while others may have their own option.
Lenders look for two factors when they are handing out home loans: your income and your credit history. If you are able to show gradual improvement on your credit file and a regular income, you will earn their trust and hopefully win the keys to your dream home.
Finally, if you have trouble managing your personal finances, it is always a good idea to seek financial advice and / or financial counselling. There are free financial counselling services available that can help you get your finances back on track.