It’s natural that when you are researching something as important as a home loan, you should do as much research as possible. However, if you apply for a home loan through several lenders at once, this could backfire and jeopardise your chance to get an approval!
Multiple applications will impact your credit score
Multiple applications will increase the risk of being declined, and every time your credit application is declined, your credit score is impacted. The credit score is the rating of your creditworthiness, and is calculated based on the information in your credit file, which is your history of dealings with credit providers over the past five years. So having numerous loan applications within a short timeframe can have a domino effect, increasing the likelihood of the next lender declining your loan based on a quick review of your credit score.
This rejection is not as arbitrary as it seems. Lenders do not trust people who make multiple applications because they assume your actions are based on a lack of confidence – they think you are making multiple applications because you are not sure anyone will accept you, or that you are desperate for a quick loan which could mean that you don’t have the means to pay it back. They may also assume that you have been turned down for a loan multiple times, so they save themselves the effort and decide that you are a high risk, so they don’t want to lend you money.
Another issue with multiple applications is that any variations in two separate applications can create anomalies in the information you have presented. This undermines your credibility, as it is essential that all the information you provide is absolutely correct and accurate.
Online enquiries are applications
Be careful when you compare lenders online, particularly if you provide personal information to make enquiries about the best rates. These enquiries will register as applications on your credit file, even if you have not provided supporting documentation along with the enquiry. When other lenders look at your credit file, they can only see that you have “applied” for the loan, and they will assume your application was rejected.
Repairing the damage
While multiple applications or enquiries over a short period of time could impact your ability to secure a loan, the damage is not irreversible. It is a minor and temporary issue in relation to your actual ability to pay back a loan, so your best option is to wait a few months while your credit score improves. To avoid the issue recurring, avoid submitting any financial information online so you can’t accidentally send in a loan application.
If your loan application is declined, it is a good idea to ask exactly why they turned you down. There could be some other issue besides multiple applications, and feedback from a lender could help you rectify the problem before applying elsewhere.
It is a good idea to apply for free access to your credit score before applying for a loan, as you can see for yourself how the lender will see you. This is another opportunity to give the best impression along with your loan application.
How to find the right loan?
It is ironic that you can undermine your financial reputation while trying to research the best loan for your circumstances. The best way to shop around is to seek the advice of a licensed finance broker such Heart Mortgage Services. Heart Mortgage Services can negotiate with lenders and find the right home loan for your circumstances, without submitting multiple credit applications.
Contact us today if you want assistance or guidance with your next credit application on 1300 861 143 or email us at clientservices@heart1stop.com
Disclaimer
This information is current as at 30/01/19. This article has been prepared by Heart1Stop, a social media brand owned by Heart Mortgage Services and Heart Financial Advisers. The information contained in this article is an overview or summary only and it should not be considered a comprehensive statement on any matter nor relied upon as such. The views expressed here are not those of Heart1stop, Heart Mortgage Services, Heart Financial Advisers, shareholders, directors or staff and associated contractors and business associates. This article has been prepared without taking into account any person’s objectives, financial situation or needs. Because of this, you should, before acting on any information contained in this article, consider its appropriateness, having regard to your objectives, financial situation or needs. Any taxation information contained in this article is a general statement and should only be used as a guide. It does not constitute taxation advice and is based on current laws and their interpretation. Each individual’s situation may differ, and you should seek independent professional taxation advice on any taxation matters. While the information contained in this article may contain or be based on information obtained from sources believed to be reliable, it may not have been independently verified. Where information contained in this publication contains material provided directly by third parties it is given in good faith and has been derived from sources believed to be accurate at its issue date. It is not the intention of Heart1Stop or Heart Mortgage Services and Heart Financial Advisers that this publication be used as the primary source of readers’ information but as an adjunct to their own resources and training. To the maximum extent permitted by law: no guarantee, representation or warranty is given that any information or advice in this publication is complete, accurate, up to date or fit for any purpose; and no party of Heart1Stop or associated entities as mentioned is in any way liable to you (including for negligence) in respect of any reliance upon such information. This article may also contain links to websites operated by third parties ("Third Parties") who are not related to Heart1Stop. These links are provided for convenience only and do not represent any endorsement or approval by us.