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Credit history management

Discussion in 'Property Finance' started by big_ben02, 26th Feb, 2016.

  1. big_ben02

    big_ben02 Member

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    Regional NSW
    Hi All - sorry about the long post...

    Before I purchased my 4th IP middle of last year, I was a little naive and and over zealous and had grand plans for doing a dual occupancy development.
    For my PPOR and first 3 IPs I dealt directly with the banks (CBA then AMP). With my 4th, being good with numbers (as an accountant), I put together some spreadsheets and was comfortable that I could service the loan and make a good return. I approached my main bank CBA but was turned down (already had PPOR and 2 IPs with them), then approached BOQ due to their accountants package, but also turned down. Finally I approached Westpac due to their professional package, but was also turned down.

    With my tail between my legs, I then took a month or two break before approaching a mortgage broker from this forum for assistance. I was finally approved for a loan with Homeloans (Pepper) but not before having to explain all the hits on my credit report. I had my 4th IP and was happy to sit on the sidelines for a while to repay some debt and build up equity.

    At the same time as all this happening, I also received a promotion at work. Given my position, I incur a lot of business expenses which I then need to get reimbursed from my employer. Ordinarily, everyone else in the same position as me has a 2nd credit card in their personal name which they use solely for the business expenses, which the company repays each month (getting a company credit card is not an option). Due to my issues obtaining a home loan, I didn''t want to apply for a new credit card as it would result in another hit on my credit report. I held off, but by Christmas time it was getting difficult to keep records of the expenses for reimbursement, so I applied for a credit card, but got rejected.

    Following the rejection, I applied for a free copy of my credit report. I have about 19-20 hits on my credit history. Half of which are for loans in existence (1 PPOR, 3 equity releases, 3 IP's, novated lease, and citibank ready credit - used as a low interest loan to buy the family car and will be repaid in October this year). The other half are for investment loans/credit card that I got rejected for (the 3 loans from middle of last year & credit card at christmas and a couple of loans from 2 or 3 years ago) and one for a personal loan that I repaid about 18 months ago. I also checked my credit score and it was 648 (the low range of "good").

    Apart from the active credit history, I don't have any black marks from failing to pay bills etc.

    Not being able to get credit is an incredible inconvenience. I am not really interested in buying another IP for a few more years, but I will need a credit card for work and the novated lease on my car expires in April this year and will need an upgrade. Further in 2-3 years I will have an opportunity to buy into the business I work for.

    I realise entries remains on my credit history for 5 years, but I've been told that banks only take notice of hits in the last 6 to 12 months.

    I am therefore in two minds. Do I apply for a credit card and upgrade my car with a new novated lease now (assuming I can find lenders who are more lenient - any ideas?), but risk rejection, leading to an even worse credit history.

    Or, do I make no further credit applications (and drive a substandard car and inconvenience of not having a work credit card), waiting for another 1-2 years once my credit hits are older, but risk that those hits will put at risk the application for a loan to buy into the business not long after?

    I am on a good salary, keep a tight rein on my spending and budget. I also have $35k buffer in my redraw account on my PPOR - I know I can afford these things, but my poor choices last year in not using a broker sooner is hampering what I do know.

    Does anyone have any experience in managing active credit files and can provide some advice?

    Thanks,
    Ben
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    That is a lot of enquiries. Some banks do credit scoring and they reject you automatically if you have had more than a certain number of enquiries especially in the previous 12 months.

    I would be inclined to avoid the credit card myself if i were you. Just keep using the existing one and keep a record of the expenses for reimbursement.

    Whem the car comes up for renewal reassess then but also best to avoid the car if you can.
     
  3. Tim & Chrissy

    Tim & Chrissy Well-Known Member

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    Hi @big_ben02

    I belive we are in a similar position, we had a broker who promised the world but couldn't deliver and I believe may have submitted numerous applications. What website did you use to check your credit history?

    How sub-standard is your car? Forgoing the car and additional card may be annoying but its probably not going to cause you any hardship so I would go without.
     
  4. big_ben02

    big_ben02 Member

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    The frustrating thing is not knowing how long I need to wait until it is safe to apply again and what credit card and novated lease providers are less likely to be as concerned about my history. It is a bit of a lottery and I feel as though I am bankrupt, even though my finances are sound and I have no bad debts.

    My car is a small Hyundai accent, but with work I need to visit clients in regional and remote locations which will require a 4WD. It is ok now, but the need will become more pressing in 12-15 months time.

    I used Veda to check my credit history, which was free as I had recently been rejected for the credit card.
     
  5. Tim & Chrissy

    Tim & Chrissy Well-Known Member

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    Are you driving on a lot of unsealed roads? If not I would stick with the accent, hyundai motors are generally good in their later models.

    4wd's don't change shape for years so a good option may be to buy an older one for cash that still has the current model shape.
     
  6. Coota9

    Coota9 Well-Known Member Premium Member

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    @Tim & Chrissy

    Link below

    Get Your Credit Score Australia - Absolutely Free!
     
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  7. big_ben02

    big_ben02 Member

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    Yes I will be going on unsealed roads. There are always alternatives - for the trips where I absolutely need a 4wd I could hire a car;

    But that's not really my point. Good mortgage brokers can be selective on who to apply for finance for a house through to ensure a good chance of success, but when you apply for a credit card or car loan you're flying blind, not knowing if you will be approved or not. If I knew I wasn't going to be approved for my last credit card then I wouldn't have applied, but when I next apply, that bank will see I recently applied for another card and assume I have multiple cards, which I don't.
    I've now got to wait 5 years for my history to clean up, which is like a lifetime...
     
  8. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    Your credit report was already in bad shape before you went to the broker. Buying 3-4 properties in a short period of time will often create a problem in itself, but shopping around lenders at random creates a problem. Most lenders will happily tolerate about 4 inquiries within a 6-12 month period. It can get a little tricky after that.

    An advantage of mortgage managers such as Homeloans Limited is that they can source multiple lenders in a similar manner to a broker in a single application. This is also a disadvantage as they're fully securetised, with each point of enquiry can lead to a credit hit or two, especially if the LVR is above 80%.

    Don't use sites like this. You're giving your personal details away to a third party. A little investigation reveals they're affiliated with Society One, a peer to peer lender.

    Instead go straight to the the source which is Veda at www.mycreditfile.com.au, pay $80 and get your credit report along with a 12 months subscription which will alert you whenever your credit report is accessed. You get more information directly from the group managing your credit file and the alert system allows you to actively manages your credit file.


    @big_ben02 You don't need to wait 5 years for these enquiries to drop off your credit report. About 1-2 years will do it. They'll still be on your credit report but lenders are more concerned with things in the last 12 months. After 2 years they're not to concerned as long as there hasn't been much activity in the meantime.

    Borrowing at 80% LVR or lower will also make lenders a lot more forgiving of multiple entries on the report.

    Also avoid novated leases (and personal loans and credit cards). You may think you've got good serviceability, but a lot has already changed very recently. Don't go out of your way to make things harder for yourself.
     
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  9. dabbler

    dabbler Well-Known Member

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    If you need the credit card, I would go to one of the lenders your already with that has a history of your repayments and explain why you need it......but I am not a broker or familiar with requirements :)
     
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  10. big_ben02

    big_ben02 Member

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    Thanks for your insight Peter. It's been about 7 months since the multiple applications, so I will hold off any more activity for at least 12-18 months, by which time my income would have increased to further improve my serviceability.
     
  11. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    They'll still do a credit check whey you apply for the card. Banking systems are heavily automated, they probably can't avoid it.