Today the Reserve Bank of Australia announced it would increase the nation’s cash rate by .25 percentage points to 4.35%.
This is the first increase since June and will impact not only homeowners with variable interest rates or fixed loans nearing their end, but also people planning on buying. Despite this, if you’re now looking to buy, or even refinance your existing loan, there are a few ways to increase the chances of your loan application being approved.
Keep in mind the things that lenders consider before approving your application. These include your credit report, existing debts, income, assets and spending. This helps them form an idea of your ‘creditworthiness’ and whether you could comfortably meet repayments. That said, there are ways to make yourself more attractive to lenders.
Some quick tips to improve your creditworthiness when applying for a loan.
1. Check your credit report
You can get a free copy of your credit report. It is a good idea to check there are no mistakes and all listed debts are correct. If anything is incorrect, you can request them to be fixed by the credit reporter. I can help you get your credit report.
2. Review your spending
Have a look through your bank statements to see where your money has been going. If there are unused subscriptions or unnecessary spending, it is a good idea to unsubscribe or cut them out in the future to show you are responsible with your spending. It can also help to create a budget to see areas for improvement.
3. Pay off debt
Make sure you keep up with any debt repayments and consider making additional repayments where you can. This can help you save on interest and also show you are responsible with debts. It is also a good idea to pay off any buy-now-pay-later debts to reduce the amount of credit you are owing.
4. Consolidate debts
It can be worth reviewing your debts to see if consolidating them could save you money. This can include home loan, car loan, credit cards and personal loans.
5. Eliminate extra credit
If you have credit cards in your name that you are not using, it can be helpful to cancel them. This is because the lender will look at the amount of credit you can access, which can reduce the amount they are willing to lend you.
6. Space out credit applications
It is a good idea to spread out applications for credit where possible, particularly if you are rejected for a loan. When lenders see multiple recent applications, they may be more wary about lending to you.
7. Demonstrate genuine savings
Lenders look at how well you can save money over time. This means that cash gifts or inheritance, while helpful to boost your deposit, won’t be considered toward the lender’s assessment of your saving habits. Do your best to make regular deposits into your bank account to show you can save.
8. Work with a broker
Okay, this one is obviously a self plug. However, an experienced broker knows lenders’ policies and what they look for in an application, and can help you not only apply for a suitable loan but also help you put your best foot forward.
Whether you are looking to purchase your first home, next home, use equity to purchase an investment property or refinance your home loan, your broker can help you find the right solution and make your application as solid as possible.