This case study is based on real clients who had defaults on their credit files. For the purposes of this article we shall call them Elvis and Priscilla. The names & certain details have been changed in the interest of privacy for the borrowers, however the key facts and how we were able to solve their problem remain the same.
Elvis and Priscilla had defaults on their credit file and they did not have a 20% deposit to avoid Lenders Mortgage Insurance (LMI). LMI is a lot harder to get approved when clients have a less than perfect credit history.
In this case, Elvis and Priscilla, had defaulted on a payment to a utility provider such as the Water Corporation, Electricity Company or a Phone Operator. These kind of defaults are generally easier to get around than financial defaults to other lending institutions which are seen as more severe by the banks.
In this instance Elvis and Priscilla’s default was relatively small. It was less than $500 and it was paid many years ago. The larger the default, the less likely it is that the lender might overlook it.
If you do have a default on your credit file and your lender can see that it was paid very soon after it was listed, it shows to the lender that you are keen to pay off any debts as soon as possible. If you leave it and only pay it off as you prepare to apply for a home loan, it does not reflect well on your application and could harm your chances of obtaining a loan.
Elvis and Priscilla were able to produce a letter which explained their situation. They had moved house and not all mail was re-directed, hence they missed the original bill. They were able to back this up by showing their moving history.
The end result is that Elvis and Priscilla were able to move into their first home. Although this was not achievable with current bank, we were able to shop around and find a lender who was willing to help them.
If you have had credit issues in the past and need assistance with your home loan, please get in contact with us about our obligation free mortgage broker service.