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Loan Approval

Discussion in 'Property Finance' started by York, 17th Sep, 2015.

  1. York

    York Finance Broker Business Member

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    In a situation where you're getting a loan approved and for whatever reason you decide to pull out of that process and apply for another loan, are there any detrimental ramifications?
    I don't mean your application gets rejected, I mean it's looking like it's going to get approved but you pull out before the actual approval.
    Will this ring alarm bells with future lenders? Or does it depend on what stage the application is up to? That is, if the broker has actually lodged the application or not?
    Say the application has actually been lodged and approved, if the applicant did not take up the offer, would this be a problem for another loan with the same or different lender?
    Any advice is appreciated.:)
     
  2. Redom

    Redom Mortgage Broker Business Member

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    If you do lots of these in a short time period yes, you'll end up frying your credit rating.

    Active credit histories have come under the microscope of insurers IMO of late.

    Its less of an issue at 80% lends.

    Also lender choice becomes important if its very active, can go to certain lenders with DUA's if in insurance territory and it can be simple explained like you've mentioned. But go to a lender that credit scores or needs to send it up to the insurer, it can be trouble.

    Cheers,
    Redom
     
  3. York

    York Finance Broker Business Member

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    Thanks for your reply. Does this apply even if you get the approval then don't proceed?
     
  4. Redom

    Redom Mortgage Broker Business Member

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    Yes.

    With certain funders you can provide that explanation.

    With bigger funders - it goes through a computerised credit scoring system, which penalises multiple loan applications in short periods of time. This computer doesn't factor in reasons for those enquiries so much.

    Cheers,
    Redom
     
  5. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    It's worth noting that talking to a broker doesn't create an entry on your credit report, although it often does if you talk to a bank directly. The credit hit only occurs when the broker lodges the application with the bank. It stays there regardless of the outcome.

    The credit hit usually occurs as soon as the application is lodged so it doesn't matter how

    A long held rule of thumb with several lenders is that 3-4 credit hits for finance within the last 6-12 months will categorise you as 'high risk' and if borrowing more than 80% there's a very real chance of an immediate decline, in some cases without appeal.

    Loan applications need to be targeted. There is room for an alternate application if necessary, but if you're continually shopping around it will have an adverse effect.
     
  6. York

    York Finance Broker Business Member

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    Thanks for your input guys. Much clearer to me now.