If there’s one important aspect that affects your application for a home loan, it is your credit rating! A credit rating is the record of your history with credit. If you’ve taken a loan in the past or had credit cards to pay off, the credit rating is a record of how good or regular you were at paying off your debt. In the eyes of the bank, someone who pays off their debt on time and in full is a safe bet.
Defaulters are a Risk
Most people fail to realise that every time they are defaulting on their payments, they are doing more damage to their financial credibility than what is immediately visible. Sure, you get phone calls from collection agencies and also have to deal with numerous emails, letters and text messages, but the damage it does to your financial or credit history is unseen and can affect your ability to raise loans for years to come!
You can be ‘Too Clean’ too
Now, you might think that the best way to have a good credit rating would be to have no debt at all, right? After all, if you do not have debt, you will never default on your payments and, therefore, no bad marks against your name. The truth is, to gauge someone’s worthiness to repay a loan, there needs to be a scale for the banks to compare you against. If you have had no credit history, they do not know what you are going to do, so if you’ve not had any debt for a couple of years, you are likely to have wiped your slate clean and may need to start again before you can get a home loan.
Save Time
The biggest issue for people with a clean credit history to get a home loan is awareness, or the lack of it. If you are not aware of what the banks demand when it comes to a home loan application and the associated credit history, then you need to go to one of the credit bureaux’s registered in South Africa for assistance.
These are the people who will help you ensure everything is in place before you apply for a home loan. Even after you have been approved for a loan, you need to maintain your ratings to ensure that the bank does not cancel your loan later. Be responsible, budget and maintain a clean credit history to be eligible for home loans as and when you might need them.