Staff Writer @ Lucid Living
“For credit is like fire, when once you have kindled it you may easily preserve it, but if you once extinguish it you will find it an arduous task to rekindle it again”. Socrates (Greek philosopher; 469 BCE – 399 BCE).
According to Kay Geldenhuys, Property Finance Processing Manager at mortgage originator OOBA, when providing credit to consumers banks look to ensure that their investment in you is safe.
“The riskier the investment, the less likely that banks will approve financing for a home loan.”
She says that it is therefore imperative to have a clear credit record when applying for home loan finance.
“When applying for a home loan, banks are going to scrutinise your credit rating. Therefore, a bad credit rating or an adverse listing (blacklisting) on your name can seriously hinder your ability to secure home loan finance.”
Geldenhuys goes on to say that one of the main reasons home loan applications are declined is because of the applicant’s credit report.
“As a result of the National Credit Act, and current market conditions, banks have tightened their lending criteria and a negative credit record may impact the result of your home loan application. To optimise your chance of securing your desired home loan, make sure you keep a clean credit record by ensuring that all of your accounts have been paid to date before you apply.”
“Most retail stores and banks’ default listings (blacklisting) will remain on a consumer’s credit record for two years. If you do choose to close an account, settle the account balance and then contact the relevant credit provider to check that your name and credit record has been cleared. If you have a judgment on your credit record, clear the account and then contact a litigation attorney to have the judgment rescinded.”
Geldenhuys says that in order to keep a healthy credit rating consumers should follow these guidelines:
• Ensure that you meet your monthly debt repayments on time. Even a payment that is only 24 hours late can be bad for your credit rating.
• If you fall behind on repayments, get back on track as soon as you can.
• Always pay the minimum installment required.
• Close accounts you don’t use. Credit providers assess the full facility of the credit agreements on record, even if they’re not being used.
• Draw up a budget – and stick to it.
• Boost your buying power and reduce your debt. If possible, pay more than the minimum payment on your accounts to further improve your credit rating.
• If you can’t make a payment, talk to the relevant creditor about making an alternative payment plan.
• Don’t ignore a letter of demand. Always be proactive and take appropriate action.