If you are in a defacto relationship or married and are planning to purchase a property, it is important that both of you have a strong credit history as it could affect your chances of taking ut a home loan. But what do you do if you or your partner’s credit report is not in great shape?
With changes to the Australian credit reporting system set to change in March 2014, it is even more important for couples to work together to keep their credit report clean.
Some people may think that if you get married and change your name, your credit history under your old name will disappear – this is not true. So if you want to buy a house with your partner, you can improve both of your credit reports by doing the following:
If you are planning to apply for a home loan, you need to lay all the cards out on the table. If you think that you can hide your credit history from your lender, you are wrong. Lenders have access to information, such as your credit report, which will show any defaults or credit enquiries. If your lender uncovers any relevant information that you did not disclose, it could jeopardise your chances of obtaining a home loan. If you do have any defaults, it is best to tell the lender straight up so they can come up with possible options for you. Also, if you are not approved due to your credit report and your partner was left in the dark, it could create tension. By being honest from the start, you can come up with a plan of attack.
Create a budget
Although you cannot fix the past, the faster you change your current financial situation, the better. Come March 2014, lenders will be able to see the past 24 months of your repayment history, so if you know that you have missed or late repayments, chances are your lender will see it too. By writing down when all of your bills are due, it will help remind you when to pay them and budget effectively to ensure you have enough money. You can set alarms on your phone, set up automatic payments or write it on the calendar- anything to help you remember. It is a lot easier if there are two people working together rather than one.
Many couples decide to have joint bank accounts as they are convenient and help you to save together. If you or your partner is a person who likes to spend, it is a good way for both of you to keep an eye on the transactions and then adjust your budget if you need to. It may work well for you to also have a joint savings account so you can both keep track of your savings. Have a chat with your financial institution and see what options are available for joint banking.
In order to create a strong credit report you need to plan ahead. Most credit reports show information from up to five years ago, so if you and your partner are planning to buy a house within a few years, it is definitely time to start improving your credit history.
It can be confusing to know whether to get a variable rate or fixed rate mortgage, and what features are important. That's why it's important to not only check the right rates, but make sure that you're getting the right features in your home loan. Get help choosing the right home loan
Anouska Linz is Manager, Online Sales at State Custodians and has over 10 years’ experience in financial services, both in broking and banking. Holding a bachelors degree in accounting, Anouska quickly discovered a love for mortgage lending and assisting people to achieve their home ownership goals. She leads a team of highly experienced lending specialists who are passionate about finding lending solutions which result in real wins for the customer. She is also a massive netball fan.
For more information on our home loans, visit www.statecustodians.com.au or call 13 72 62.