I got bad credit. Can I get a loan?

Any general questions you might have in regards to loans and finance.
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totoro
Posts: 48
Joined: Wed Jun 17, 2009 4:58 pm

I got bad credit. Can I get a loan?

Post by totoro »

Hi there,

I want to get a home loan. I am an IT consultant, and I have a decent income. But last year, I missed a couple of my credit card repayments as I was out of the country. The missed payments were less than $500, but I heard that it can still damage my credit. I have already cleared the dues as of now, but I was wondering if that would have an impact on my new loan application.

If I apply for a new loan now, what would the banks think? Does it matter to other banks if I had applied for a loan before? By the way, I run my own business now and contract to other firms. But I had applied for a line of credit, and I heard that it is all recorded. Any suggestions?

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Otto Dargan
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Re: I got bad credit. Can I get a loan?

Post by Otto Dargan »

Hi totoro,

Credit enquiry is a record that is included in your credit file each time you apply for a loan. It doesn’t matter if you applied for a big loan, such as a home loan, or a small credit like those of telephone bills and utilities. Every credit application creates a credit enquiry.
Credit enquiries on your credit file contain the following information:
  • The name of the lender with whom you applied for a loan
  • Loan reference number
  • The type of applicant you were, i.e. whether you were the main applicant, co-borrower or a guarantor
  • The amount of the loan
  • The type of application. E.g. if it was an application for home mortgage or for a credit card
Typically, if you have more than two credit enquiries on your file within the last six months, then it may create a problem for your loan application. Although a credit enquiry does not indicate whether your loan was approved or not, lenders may feel that you impose a high risk to them if you have many enquiries on your file.

That is because when you are applying for credit multiple times within a short period, it may make the lenders feel that you have been declined in all of your previous loan applications – or else you need not have applied or credit multiple times. Consequently, multiple enquiries on your credit file may reduce your credit score.

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

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totoro
Posts: 48
Joined: Wed Jun 17, 2009 4:58 pm

Re: I got bad credit. Can I get a loan?

Post by totoro »

So does it mean that I am not able to borrow to buy my home?

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Otto Dargan
Mortgage Specialist
Posts: 7729
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
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Re: I got bad credit. Can I get a loan?

Post by Otto Dargan »

Hi totoro,

If you are unable to prove your income through traditional means, then getting a low doc home loan may be the right option for you. You may be able to get a low doc loan without any recent tax returns.

You will, however, need to provide some evidence of your income to the lenders. Most lenders require you to have a valid Australian Business Number (ABN) that has been running for two years, although there are some specialist lenders who may accept ABNs that have been registered for just a day. You will have to sign an income declaration form and should be able to provide at least one of the following: If are borrowing $400,000 for a property worth $530,000 property then you will need a loan to value ratio (LVR) slightly above 75%. If you are getting a low doc loan with LVR above 60% then you may have to pay lenders mortgage insurance (LMI).

If you need more information regarding your home loan application then you can call us on 1300 889 743 or fill out our free assessment form.

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

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totoro
Posts: 48
Joined: Wed Jun 17, 2009 4:58 pm

Re: I got bad credit. Can I get a loan?

Post by totoro »

Thank you for the reply. I would get in touch with you guys soon.

melharris56
Posts: 44
Joined: Wed Jan 02, 2013 2:08 pm

Re: I got bad credit. Can I get a loan?

Post by melharris56 »

I recently changed my cable TV provider and my internet service company. Does this create new enquiries on my file and should I be worried?

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Otto Dargan
Mortgage Specialist
Posts: 7729
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
Contact:

Re: I got bad credit. Can I get a loan?

Post by Otto Dargan »

Hi melharris56,

As stated previously, every application you apply for, whether big or small, creates an enquiry on your file. So, if you have more than two enquiries in the duration of last six months, then this may have reduced your credit score. In such case, it is better to wait for some time before you apply for a home loan.

An enquiry remains on your credit file for five years. As time passes, the enquiries will have less effect on your credit score. So, it may not create much of a problem in the long run.

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

melharris56
Posts: 44
Joined: Wed Jan 02, 2013 2:08 pm

Re: I got bad credit. Can I get a loan?

Post by melharris56 »

I didn’t know that these small utilities might affect my home loan application. Thank you for clarifying that to me. Now I will be more prudent and pay much attention to my credit history when I apply for a loan. If I have any doubts, then I will definitely ring you guys up.

Cheers!

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