- Make sure you maintain a good credit record.
- A good credit record goes a long way to getting bank approval for a bond.
- Manage your debt – don’t take on more than you can afford.
- Pay your bills on time.
A credit report is a summary of your financial status as regards expenditure and debt: what you spend your income on, whether you can afford the debt you have, and whether you have faced legal action initiated by a lender for non-payment.
A good record of servicing debt is your most important asset when buying a house. This is because it’s the first thing banks look for when considering your bond application and will influence a lender’s decision on whether to approve your application for a home loan.
However a good credit record can’t be achieved overnight. “If you are considering buying a house in the next few years, you should do what you can right away to guarantee you score well,” says Kay Geldenhuys, Head of Sales Fulfilment at ooba home loans – South Africa’s largest home loan comparison service.
Here, Geldenhuys shares her three top tips for ensuring your credit record is squeaky-clean and that you get the thumbs-up when it’s time to make the exciting move from house hunter to homeowner:
Tip 1: Start small
“Ironically, the golden rule of credit is that it’s easier to get it if you’ve already had it,” Geldenhuys explains, adding that this isn’t as impossible as it sounds. “It simply means that you should start small, proving that you’re responsible with credit so that the bank will look favourably on your home-loan application when the time comes.
Store credit, cellphone accounts and bank loans – especially for other assets, such as a car – are a good place to begin.”
A credit card also has a strong influence on your credit score, so try to include at least one of these in the mix, she advises. Then be absolutely diligent about making monthly repayments. “Paying back your credit card balance has a significant impact on your score, as it’s not just about having the credit, but how you deal with it that the banks are assessing,” she explains.
Tip 2: Pay your bills
While the timely payment of your credit card or store debt reflects favourably on your credit record, so too does the payment of your bills, says Geldenhuys. “Paying all your bills on time and at the correct monthly instalment, or even a little more, will help you build up a good credit record.”
Tip 3: Get your credit report
“Every South African is entitled to check their credit record, at no cost, once a year,” Geldenhuys says, explaining that this can be done through any registered credit bureau.
While there are steps that can be taken to rehabilitate a bad credit record, the best way to be financially fit is to pay your bills on time and in full. “It’s simple really: to ensure a good credit record, don’t get into more debt than you can afford, and then make sure you pay it all back. These two crucial habits will prove good practice for repaying your home loan when the time finally arrives,” she says.
If you want to assess your chances of securing home loan approval with your current credit record, you can get prequalified with ooba home loans, either by using their free, online prequalification tool, the Bond Indicator, or by getting one of their experts to prequalify you. They also offer a range of tools that make the home buying process easier.