Your credit record & buying a home

Most South Africans require financing to buy a home and a good credit record is one of the first steps in this process.

This is according to Albertus van Staden, Head of Credit at FNB Housing Finance, who says a home loan is usually one of the biggest investments made in your personal capacity.

“Banks and financial institutions will look at your individual credit profile before granting you the finance to buy your home. Proving that you can manage your debt obligations responsibly is vital.”

Your credit record is kept with a credit bureau and is used to determine how likely it is that you will repay the money needed to buy your house, he says.

It reflects any credit agreements that you have with approved financial service providers and details the frequency of payments, any missed payments, overdue accounts, and if there are any judgments against you.

As per the National Consumer Act, credit providers must make use of this information when they assess a customer’s credit worthiness.

It is vital to pay bills on time, every time, says Van Staden. “If you have a neglectful attitude towards your creditors this will reflect at the credit bureau and may mean that you have to wait for your dream home.”

Van Staden suggests checking your credit profile a few months before your apply for your home loan.

You are allowed to access your credit record profile free of charge once a year and can also purchase your report for a minimal fee from the credit bureaus, he says. “This is a good exercise to see if there are any judgments listed against your name, or if there is any incorrectly listed information on your repayment behaviour.”

If your home loan is rejected, you have the right to ask the home loan provider the reason. If it comes to light it was because of a poor credit record, there are a few actions to take.

“Pinpoint what in your credit record caused the bank to decline your home loan application,” says Van Staden.

Sometimes, a debt may be fully repaid, but hasn’t reflected at the bureau yet; you need to ask the credit provider to update this. You can also ask for a settlement letter to confirm that the debt has been settled as proof to the credit provider.

“If there are outstanding payments that are impeding your record, there is no easy way around this, but to get up to date with your obligations as soon as possible and put house hunting on hold until this happens,” says Van Staden.