Financing for Investors in the Current Post APRA environment 2015

So, if you have had 3 loans approved in 3 months you saying it can be an auto no from the system, but then someone should look at the no before it is returned ? I think all brokers would do this, or explain the situation before the system returns the no ?

 

Can you PM me recently if not wanting to be out there (I think a lot of the policy etc should not really be out in the open myself).

 

Sometimes with some lenders a automatic credit decline cannot be overturned, even where there is a simple explanation. Crazy as it sounds.

 

In this scenario you'd have a couple of choices prior to submission - use a lender that doesn't credit score, or use a lower LVR. a busy file at 90% is different than a busy file at 80%.

As a broker, you're not going to risk an auto-decline if you know it can be avoided.

 

Its partly because of how credit reporting in Australia has operated. Your credit reports show the applications you've made for credit and the provider (and the loan amounts). It doesn't actually show whether you've accepted the credit offer, or your repayment history. Note that some of this is changing with a positive credit reporting system legislated and introduced, but it will take time for it to show repayment histories, etc. There are some early adopters, but it still isn't wide practise.

Hence, lenders are using information metrics like 'how many applications have you had in the recent past' as indicators of credit behaviour, rather than your actual repayment histories as they may not have full coverage of this (most banks don't ask for your loan statements with other banks). Having 5 applications in 2 months is likely to be an indication that you've been shopping around and may have been rejected for credit. The computer doesn't has the full information set available on what loans you take, hence recent credit activity is a metric thats used (imo overly used) in credit scoring systems.

And yes, it can most certainly cause trouble. Particularly with the insurer.

There's ways around it by choosing alternative lender providers of course, but that may not be the most optimal outcome.

Cheers,
Redom

 

About this time last year a client bought 4 properties in 3 months. Loans 1-3 weren't too tricky. Deal number 4 was challenging.

In many cases it's not difficult to get the lender to overturn a decline if the decision was made by a human (and you can point out why you feel they made an error). If it's made by a computer you need a very strong argument to get it overturned. Lenders trust their automated systems and they've got the stats to back up that thinking.

Fortunately there are a few lenders that don't use automated decision tools. Every deal in individually reviewed.

 

It's out in the open. That's what's good about this site. In any case we don't know any secrets about credit scoring. Nor do the assessors or bank staff. Like amateur sleuths we learn by trial and error, gut feel and shared knowledge. Trouble is, lenders can dial up or dial down credit score when they want to turn up or down the number or type of loans. Makes it tricky.

Interestingly there are a couple of gimmes with credit score.
Don't be a young single male
Don't work in an industry in downturn
Don't have more consumer credit than assets
Do complete the full application, including landline numbers even though it's 2015 and no one has a landline anymore.
Do stay at the same job and address for at least the past two years.
Do try and have as low an LVR as possible.
Don't have more than a reasonable number of credit enquiries in the past year. For a fhb this might mean less than 3 for an investor with multiple properties this might be 5.

 

Thanks for the info guys.

With above Rolf, for clarity, are you saying dump any card with only 1000 limit.


Long memories yes - thanks to computers, so have some customers - but we can choose to forget .

 

very true @tobe i find it hard enough to walk my dog twice a day as oppose to researching deals.

 

i'm closing some cards as we speak.
with overseas credit cards - is there anyway banks in australia would know? that you have that credit card - i presume the uk would, china, indonesia or malaysia (unlikely)

 

Honesty is the best policy. In practice I don't think lenders can tell. If you have had the card more than 5 years they may not be able to tell about Aussie cards.

 

When applying for a loan in Australia you mean? They'll ask for your bank statements, and could question recurring payments on them.

 

Optimism. John McGrath to list on the stock exchange with $130 million float

 

question was more on if i apply for an australian home loan and if i had credit cards that was issued by overseas banks would the australian bank be legitimately able to detect these or not?

 

Not many lenders ask for bank/transaction statements, believe it or not. If the card had a zero balance or you had made the payments in cash etc it wouldn't show on the statements anyway.

 

no