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Keeping score of your credit rating

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In many ways, applying for a loan has never been easier. Interest rates are comparatively low and competition among lenders for new business is intense, so it can come as a shock when a loan application is turned down. The reason is often a bad personal credit score, but few people understand what that is, let alone how to improve it.

Having a good credit score can help you secure the best financial deals, but first you need to understand what your credit score is and what steps you can take to improve it.

What is a credit score?

Your credit score is based on information collected by credit reporting agencies and documented in your personal credit report. This information includes personal details such as your age and where you live, how much you’ve borrowed and who from, the number of credit applications you’ve made and any unpaid or overdue payments. These could relate to a bank loan, rent, mortgage or even an overdue phone bill.

Lenders and credit providers such as banks and credit unions use this information to work out how risky it is to lend you money.

How do you find your credit rating?

The good news is that you can get a copy of your credit file once a year for free as well as your credit score from online sites such as Creditsavvy, Equifax (previously called Veda) and Finder (which uses Equifax scores).

Depending on the credit reporting agency, you will receive a number out of 1000 or 1200 that’s broken down into five categories, from excellent to below average. If you fall into one of the lower categories, lenders may ask for more information or deny you credit.

It’s worth checking your credit file before you apply for a loan to make sure the information is accurate and that you haven’t been the victim of fraud or identity theft. If there are mistakes, credit providers and reporting agencies are legally obliged to investigate and correct them free of charge.

How to improve your credit score

You can increase your chances of being approved for a loan by understanding your score, correcting any errors and improving your creditworthiness with some simple actions.

  • Pay your bills on time.
    When you’re busy or on the move it’s easy to overlook an electricity bill or to forget a payment. One way to avoid this is to set up automatic payments.
  • Lower your credit card limits.
    You may think having a high credit card limit is a mark of success, but it can count against you. Lenders consider your credit limit as a liability even if you never use the full amount and pay your balance in full every month.
  • Consolidate your debt.
    By consolidating several personal loans or credit cards into one it can make it easier to keep track of repayments and save on fees and interest.
  • Avoid making multiple credit enquiries.
    Making lots of enquiries in a short space of time has a whiff of desperation about it and can lower your credit score. Do your homework, only consider a new loan or credit card when you need it and then apply for the options most suited to your needs.
  • Notify your credit providers if your circumstances change.
    If you move be sure to notify your bank, other lenders and utilities so your bills will be redirected and you won’t inadvertently miss a payment. The same goes if you change financial institutions – you need to contact loan providers to switch over automatic payments.

If you are about to start house-hunting or see an attractive investment, then timely access to credit is critical. Knowing your credit score and improving it if necessary can not only speed up your loan approval but also help you negotiate the most competitive rates.

If you would like to discuss ways to tackle debt and get your finances in shape, give us a call on 03 5434 7690.

Finance brokers make the difference as banks tighten up

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Access to finance has become difficult and time consuming, leading to a surge of enquiry to finance brokers, who are able to get a positive result efficiently by having market knowledge and access to dozens of institutions.

While major Australian banks are expected to face further scrutiny on their lending practices as a result of the Royal Commission, many smaller finance providers – who are far less impacted – have embraced the opportunity and are now growing their market share.

Non-bank housing credit has risen by approximately 13% over the past 12 months, compared to growth of just 4.8% for the big four Banks.

Growth in loans to housing investors has dramatically decreased with the big four banks too, jointly by the impact of the Royal Commission, but also due to the Australian Prudential Regulation Authority (APRA) placing a cap on interest-only lending, a favoured product for investors.

These policies do not apply to the entire market, leading to a sharp rise in interest-only investment home loan issuance among non-bank lenders who are able to offer the product and also at comparatively cheaper rates.

Obtaining finance will remain difficult for some time still, however the banking marketplace is large and knowing where to go for your particular circumstance is vital.

Endeavor Finance is available to help with a range of finance options. Whether you have been turned away by a bank or want to assess your options, they can assist. Call today to discuss what you need. 03 5434 7690.

Why choose a finance broker over a bank?

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It’s a question that most people ask when needing a loan – finance broker or bank?

If you’re on the market for a loan chances are you currently bank somewhere and have been a loyal customer for 10+ years. They are the first place that comes to mind when you need a loan. They’re easy to talk to, know your history and have your trust. They’ll get you the best deal, right?

Wrong. Just because you have a ‘relationship’ with your bank doesn’t mean they have the best market rate and fees compared to other banks. Sure they’ll try their best to get you attractive rates available within the company, but their best might be higher than a bank two streets across.

This is where a finance broker comes in handy. A finance broker is your secret weapon. There are a number of reasons why it’s worth choosing a finance broker, here are a few:

Time

Going through the process of a loan can be tiring and frustrating. A finance broker is there to do all the work for you and present it in an easy-to-understand way.

Variety

Finance brokers are associated with a number of financial institutions and will explore a variety of options to find what is the most suitable for your unique situation.

Knowledge

Finance brokers do one thing – loans. They deal with banks daily and are aware of the latest market rates and fees between banks. They know what needs to be done to get the ball rolling and will help with all paperwork and applications.

Funds

Brokers don’t just look at the now, they consider where you will be in five years and whether this loan will still be the right one for you. That includes lower fees, lower rates and special features.

 

A loan can be one of the biggest financial decisions you will ever make so it’s worthwhile getting professional advice when trying to find a lending solution. Let us help you on the journey. Get in touch today.