Broker busts credit score myth we all believed was true
A BUNDABERG broker has revealed why a growing proportion of people are being rejected for home loans.
Due to the recent tightening of credit policies, coupled with growing household financial stress, experts are warning potential home buyers' already-tough lives are now being challenged that much more.
New data from HashChing revealed 41 per cent of surveyed brokers believed more than a quarter of home loan borrowers who secured a loan last year would not have been successful had they applied for the same mortgage today.
While there are a number of factors behind the startling results, Coral Coast Mortgage Solutions broker Rob McNeice highlighted three key contributors to the growing problem.
"Credit policy has tightened quite a lot with the lenders, credit scoring is here to stay ... and inquiries," he said.
The more inquiries a person has on their credit file can also have a significant negative impact on credit scores.
"If you've got more than six inquiries in 12 months, quite often the lenders will decline the loan," Mr McNeice said.
He explained inquiries consisted of a person making any kind of attempt to borrow money.
"If you are on a site and you enter your income and age, that won't do anything at all, but as soon as you key in a name and address it'll do a credit check on you and it'll show it as an inquiry.
"It might be nothing at all, but it's an inquiry and that will start affecting your credit score, so when it comes time to getting a loan, you'll have to justify what they were."
Mr McNeice, who has been in the industry for about 21 years, said more than 30 per cent of home loan applications didn't go through.
"The way I work, I get to know my clients, their credit report, savings, patterns, etcetera," he said.
Mr McNeice said banks' lending policies had tightened because of changes in investment ruling.
"When money tightens and rules tighten, lenders have to look at their policy and think 'where can we adjust'," he said.
"They look at how much you're borrowing, personal debt is a big thing, the way people conduct their affairs, how they spend their money, how they pay loans and credit card payments on time."
Mr McNeice also busted the long-standing myth that people had to have credit cards to accumulate a credit score for the purpose of a home loan.
"Getting a credit card does not mean you you'll get a home loan. You have to have a saving ability. They want to see a five per cent of the home's purchase price saved over the past three months or longer. They look at the character of the person."