Loan Tips – Have a Clear Credit History

If you read my last post on How to get the best investment loan I mentioned that the major lenders use the number of credit and loan applications checks as a determining criteria for loan applications.

From personal experience this could stop a potential property deal before it began.  The banks look at how many credit applications you have made over a period of time.  No problems you say, well this includes store cards, credit cards, mobile phone contracts and more.   If you are over the banks limit they may not consider you for a loan.

This actually happened recently, I had changed banks and consolidated my loans and drawn on the equity from my home, at the same time applied for new credit card and an investment property loan.

After Speaking with our financial planner we re-arranged my accounts and set up a business account with a credit card.  Everything was in place to purchase an investment property.

We found a great deal and purchased it.  Set up another account and pre-arranged another loan for our next investment property. Missed a great buy but still found a good deal put a contract in and got finance approved, property failed building inspection, we terminated the contract and did not proceed.

Things are quiet no good deals around. The mobile Phone breaks so I purchase a new phone on a 24 month contract, all is well.

One Saturday morning while reviewing the property market we found a good deal that met our investment criteria and put a contract in on the property and finalise the pre-arranged loan.   Due to the time between contract the bank gets another credit check.

A real estate contact rings the following weekend with a great deal, we inspect the property and see huge potential, do the sums and know we are getting close to our borrowing capacity but have enougth to squeese it through and decide to put in a contract before getting a loan pre-approval the loan arrangements.   Ring mortgage broker and explain the situation and begin the loan arrangements all is going well.

A good friend rings with another great property deal wanting to do a joint venture, we do our homework the numbers stack up and we stand to make a tidy sum.

Notify the motgage broker of the new deals and that we want to use different lenders to avoid cross collateralisation.  He suggests we draw down the equity from the first investment property to fund the deposit of the new venture.

We do the sums and it is manageable and sign the contract while the mortgage broker submits our loans applications.

All is going well, non of the properties are cross collaterilised, all the properties have passed building inspections.  Feeling great as we had  we managed to find four property deals to purchase 5 properties in under one month.

Then came the curve ball, the mortgage broker rings saying the banks declined our loan application because I had failed my credit history check.  We discover that the banks look at the number of credit enquiries against your name over a six month period and as a result of having 8 against my name our loan was declined.

Now its not all bad news, we found out that this can be fixed by obtaining a VEDA Advantage credit file.  If you are pressed for time and in a hurry, you will need to pay for the service.  However, if your request for access to your credit file relates to the refusal of an application for credit or is otherwise related to the management of your credit arrangements then you are able to request a free copy.

If you have the time I would strongly suggest that you use the free option it might take a few days but it is worth the wait.

Till next time

Be well