- Make sure you maintain a good credit record. A good credit record goes a long way to getting bank approval for a bond.
- Maintain a good credit record by clearing outstanding debts, and paying your bills on time
- Check your credit record for errors, and lodge disputes with the credit bureau if you find any.
- It usually takes about three months for improvements to your credit record to register.
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.
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.
Basically, your credit score is a three-digit number that tells the bank how much of a risk you are.
First, find out your credit score
You can find out your credit score by getting prequalified with ooba Home Loans, or using our free, online tool; the Bond Indicator.
600+ is the minimum you’ll want for your credit record, while anything above 670 is considered a good credit record.
Improve your credit score
Even if your credit score is lower than would be ideal, we can advise you on ways to improve it. But a good credit score can’t be achieved overnight.
Here are some 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:
1. Start small
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, cell phone 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. Paying back your credit card balance has a significant impact on your score.
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.
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.
3. Check for negative information on your credit report
By “negative information”, we mean things like court orders, which will be present on your credit record for at least five years after being issued.
Check your credit record for such information and resolve the issue bvy paying the outstanding amount. The court order will be removed from your credit record once the credit bureau receives proof that the debt has been paid.
4. Dispute claims
You can check your credit record for information that doesn’t seem correct, such as late payments that you actually made on time, and lodge disputes with the credit bureau. Provide as much evidence as you can in the form of supporting documentation.
It usually takes about 20 days for the credit bureau to investigate such disputes and correct the information.
How long will it take for improvements to show?
According to businesstech.co.za, improvements usually start showing up on the credit record after around three months, but it’s recommended to wait about six months before reapplying.
Improve your chances of getting a home loan, regardless of credit score
Improving your credit record is one way to increase your chance of home loan approval. Another is to apply for a home loan with multiple banks.
Some banks have less stringent lending criteria. So even if your application gets rejected at one bank because the credit score is too low, another might be willing to grant it for the same credit score.
ooba Home Loans can assist in this. We submit your home loan application to multiple banks, allowing you to compare deals and pick the best one.
In addition, we offer a range of tools that can make the home buying process easier. Start with our Bond Calculator, then use our Bond Indicator to determine what you can afford. Finally, when you’re ready, you can apply for a home loan.
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