PREPARATION FOR BORROWING TIPS – No 1.
Probably one of the most common reasons for failing a loan application is one’s personal financial history. By this I mean where someone has had a disputed account and delayed payment until the dispute has been sorted out or even just forgotten to make a payment on time.
I recently proceeded with an application with clients who were in their 20’s. They had had an argument with a Telecommunications company due to an account which seemed to be overcharging them. Payment was delayed until they felt the problem had been rectified.
The issue was that the Telecommunications company had listed them on a Credit Report as non-payers after 7 days of non-payment. Even though the dispute was eventually resolved in the client’s favour and they had a letter to prove that, the listing remained.
Unfortunately, my clients did not realise that the they had been listed. Nor did the listing explain the reason for the non-payment after 7 days, nor did it have an explanation as to the result of the dispute.
When they were being assessed by the Bank, this was the issue that finally drove the Bank to refuse finance. Upon being queried, I was able to establish what the Bank’s concern was and obtained agreement that the application would be reviewed upon provision of a suitable explanation.
Fortunately we were able to do that and my clients were able to obtain their finance.
The flow-on affect of this was that the clients were late in obtaining finance approval and had to go back to the vendors and request an extension to the finance clause. The vendors would only give a one week extension and this wasn’t long enough. On the second request for extension, the vendors refused and the clients missed out on buying that house. You can imagine how they felt!
All this for something that was not their fault and which they were initially unaware of.
The lesson is simple. If you have been in a dispute over an account and it dragged on, you are well advised to obtain a Credit Report prior to making a finance application. This gives you the opportunity to approach the business who listed you in the first place and request that they remove the listing or see that some explanation is provided to the Credit Agency.
You will still most likely have to provide a written explanation to the finance provider, but it will save you time. And on a 30 day contract with a 14 day finance clause, this is of high importance.
If you are not sure about how to do this or if it is worth doing, discuss what happened with your broker and ask for their assistance.
Finally, keep any and all records of communication with businesses you have disputes with or to whom you have made delayed payment. Make sure all the communication is in writing and get the business to put their communication back to you in writing as well. You have no evidence of verbal communication.
Peter Connolly ADFS AMC
Authorised Representative of AMP Financial Planning Pty Limited
ABN 89 051 208 327 AFS Licence No. 232706
Level 8, 33 Alfred Street Sydney NSW 2000 Australia
Financial Aspirations Australia Pty Ltd is an Authorised Representative of AMP Financial Planning Pty Ltd. Peter Connolly is an Accredited Mortgage Broker and Financial Planner who is a Director of Financial Aspirations.
Contact: (07) 3367 2555 or Email: email@example.com.