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Having your home loan application declined can come as a shock, but unfortunately, it does happen. However, it doesn’t mean you should give up.

Having your home loan application declined can come as a shock, but unfortunately, it does happen. However, it doesn’t mean you should give up.

There are steps you can take to help correct any problems and give you a better chance of success for your next application.

Speak with your lender
Your lender knows what makes an application successful, so by going straight to the horse’s mouth, you can find out what was wrong with your application specifically. A decline can be for any number of reasons so getting to the bottom of it at the time is really important so that you can give yourself the best chance next time. Insufficient savings, too many credit cards and personal loans, property in poor repair, poor repayment history or even poor conduct on an account that you have with the institution in the past, could all be reasons for the decline. They can also give you advice on how to improve your financial situation to give you a better chance at being successful next time.

Check your credit report
Your credit report is really important for lenders in determining if you area good risk. Many borrowers don’t regularly check their credit report, so they have no idea what is listed or if there are any mistakes. By checking your credit report, you can fix any defaults listed on it or resolve any incorrect information.

Lots of credit enquiries, paid and unpaid defaults and loans to payday lenders can all raise concerns for lenders. Always approach applying for credit with caution. Do your homework first and then apply for the one that you actually want. Personal loan, car loan, credit card, interest free, store card and even contracts with utilities providers like mobile phone or electricity, can all result in a credit enquiry on your credit report. Your aim should be to keep these to a minimum.  

Defaults will need to be paid for most loan applications to proceed. Paid defaults can still paint a poor picture, so a good explanation will be needed for the lender to consider.

If you are declined due to defaults,a ll is not lost. State Custodians have specialist loans that take these into consideration enabling you to borrow. If you are prepared to wait, then defaults have a date when they disappear from your credit report. This will be listed on your credit report and means that poor conduct in the past doesn’t stay with you forever.

Review your finances
It is often the small, simple changes that have a great effect on your home loan application. You will need to review all of your financial commitments to see how you can manage them better. It may mean that you will have to get rid of certain expenses such as foxtel or your gym membership in order to lighten the financial load.

Credit cards and store cards also have a big impact on your application. Make sure you are meeting repayments on time and also making pay off these cards, reducing the limit or cancelling them a priority. Remember, even if you have a credit card with a $0 balance, the lender will still use the maximum limit when assessing your application.

Having lots of credit cards and personal loans with not a lot to show for them can paint a poor picture of your finances. Make it a priority to pay these off and quickly as possible. Not only will it be easier to remember to pay all your monthly repayments but it will free up cash to save a bigger deposit. Lenders like seeing evidence of a solid savings pattern.

Make a change
This is the most important step. You may have spoken with the lender and checked your finances, but if you don’t do anything about it, then you can’t expect to be successful the next time around.

Start by creating a simple budget to help find the extra cash to pay off small debts and build up your savings. If you need to consolidate debt and refinance, remember that your repayment history for 6 to 12 months will be scrutinised. Being organised and paying credit cards, personal loans and even your loan repayments in full and on time is paramount. Getting organised can also help ensure that unwanted defaults don’t just appear on your credit report.

Be Honest
A declined application may not be something that you want to own up to, but by sharing this information with your next lender or broker they can proceed with caution and ensure that you are not declined again for similar reasons. Advice early on could help ensure your application is successful.

An unsuccessful home loan application may be a setback; however, it is still possible to turn this around and be successful in the future.