If you applied for a home loan and were declined it will be because you do not have a good credit score. You can not get a loan from a financial institution if you have a bad score.
This guide will help you to get your credit score back on track.
Credit rating and credit scores:
A credit rating is an estimate of the ability of a person or organization to fulfil their financial commitments, based on previous dealings.
If you have always paid back your loans, credit cards and accounts you will have a higher credit rating than someone who has missed or made late payments.
A credit score is a three-digit number calculated from your data-rich credit report and is one factor used by lenders to determine your creditworthiness for a home loan, personal loan, or credit card. Your score can affect whether you are approved as well as what interest rate you are charged.
What happens when you have a poor credit score or have been blacklisted?
When you default on payments or make on- going late payments to your creditors you get blacklisted or listed as a slow payer. This has a negative effect on your credit score.
Once you have been blacklisted by a person or company or a judgement has been taken against you, your chances of getting approvals on loans are slim to none. It can take years and a lot of admin to clear your name with the multiple credit bureau.
Check you credit report now http://www.clearscore.com or http://www.transunion.co.za
What happens when you default on payments?
- The creditor sends you invoices that are not paid. After several attempts to collect payment unsuccessfully the creditor then.
- You are handed over to attorneys and incur further expenses as you now need to cover attorney fees.
- If you still do not pay the attorneys will summon you to court.
- If you do appear in court, you can make a payment plan with the judge. If you do not appear in court a judgement will be taken out on your name and loaded on your credit report.
- Judgements are costly to remove as the attorneys who loaded them need to go to court to remove the judgement
What are the steps involved for changing my credit scores from a bad one to a good one?
- Get your credit score report and see where you stand
- Make a judgement call about how best to pay back the debt. If going under debt review could stop you from losing your house or call you should get in touch with a debt counselling company first.
- Start by getting hold of all your creditors contact details
- Get hold of any lawyers who have listed judgements under your name and make a payment plan to pay those off first. Once those amounts are cleared you will need to ask the lawyers to remove the judgements which will have a cost attached.
- Get hold of all the creditors and decide with them to pay your debt up to date
- Make sure you are not bouncing debit orders or defaulting on monthly instalment payments
- Make sure all your payments are no longer than 30 days behind
- Pay your debit orders and accounts on time for 6 months to improve your credit record.
- Have at least 1 loan, credit card, monthly payment that you pay on time each time to keep your score in a positive position.
- Once you have paid back all your debt. Keep your payments up to date for 6 months and then re-apply for your home loan.