It was recently reported that 80.7 percent of ooba home loan applicants secured financing in the first quarter of 2021. Fifteen percent of applicants were turned down due to lack of affordability and lack of bad credit rating. Of those rejected homeowners, 44% were turned down by their own bank. So what do you do if you find yourself in this situation?
Spread your risk
“When you apply for a home loan, you would assume your first stop would be your bank. However, a bank’s lending criteria are regulated by the national credit law and therefore there is no guarantee that it will approve your home loan. “On this basis, we recommend that you spread your risk by using a home loan comparison service to increase your chances of getting approved at the best possible interest rate,” said Rhys Dyer, CEO of ooba Home Loans. “We will apply to several banks on your behalf,” Dyer says. “We were successful in securing mortgage financing for about two out of four applications that were initially rejected by their bank. Indeed, each bank uses different loan criteria when evaluating a request, ”he continues.
Bad credit rating
When banks assess home loans, their first step is to check your credit score. “A bad credit rating is the most common reason for rejection. Fortunately, there are ways to improve your position before you apply again, ”says Dyer. If your credit rating is bad (less than 600), it is recommended that you obtain a copy of your credit report from the credit bureau.
“If you identify any errors on your credit report, the credit bureau should be notified and you should then take appropriate action to correct the information displayed on the report,” Dyer adds. “If the information is correct and your bad credit is the result of bad debt or no credit history, you need to take more action. “
So how do you improve your credit score?
- If your bad credit rating is due to a lack of credit history, which means you have no record of your ability to take out and repay a loan, start by opening small retail accounts or a credit agreement. mobile telephony. These debts must be repaid on time and in full (if not a little more) each month.
- If your credit rating is low due to a bad credit history, pay off your debt as quickly as possible and do the following:
- Pay your bills on time.
- Settle and close accounts.
- Pay more than the minimum installments on existing debt.
- Avoid asking for additional credit during this time.
- If you are applying for a home loan alongside a partner or are married in community of property, your partner will have to follow the same steps.
- Once you have started your credit rehabilitation, you should continue to check your credit score every three to six months and make any necessary adjustments.
- Work with a reputable home loan comparison service. “Before you start your home loan journey, find a trusted service provider, know your credit score, and get a prequalification certificate,” Dyer sums up. “This will give a good indication of what you can afford and if you are potentially eligible for a loan. ”
* Source: Provided on behalf of ooba Home Loans, ooba.co.za