Like to own a home but have taken yourself out of the game due to a problematic credit history? Think again. It takes a bit of discipline, planning and a healthy dose of persistence, but credit issues can be overcome.
Information is your best friend when conquering a challenging credit history. The first step is to understand your Credit Score and the options you have to turn it around.
A Credit Score is a number between 0 and 1,000 or 0 and 1,500 (depending on the credit reporting agency). Things like defaults, whether you pay your bills on time, how often you apply for credit etc, all count towards how healthy – or not – your Credit Score is.
There are three Credit Reporting agencies in New Zealand: (1) illion, which uses a 0 to 1,000 Credit Score rating, (2) Equifax, which also uses a 0 to 1,000 rating, and (3) Centrix, which uses a rating of 0 to 1,500.
If you want to be really thorough, you might choose to find out how all three rate your Credit Score (they do vary). But the important thing is to start building an understanding of your credit profile, and more importantly, the payment and money management behaviour that can help build a more-healthy credit outlook for your future.
One online option you might like to look at is Credit Simple (owned by illion): this tool calculates your Credit Score on a scale of 0 to 1,000 and lists account and other details behind your score – information that helps to highlight the impact of late or missed payments, defaults etc.
So, once you have a better understanding of your personal Credit Score and what’s affecting it, it’s time to make a plan.
Unpaid defaults? Tackle these as quickly as possible. Get in touch with the provider, agree a plan to get the outstanding amounts sorted and stick to it. Two things are vital here – proactive communication and doing what you say you will.
Sluggish bill payment behaviour? Many providers report on bill payment behaviour every month, so if you’re consistently late, your Credit Score will take a hit on a regular basis. Whether it’s setting up Automatic Payments or another process that works for you, get a system in place to make sure that you pay your bills on time.
In a nutshell, use your Credit Report to create a game plan that deals with outstanding issues and helps you manage your ongoing payments – bills, loans etc – in a way that will build a healthy Credit Score in time.
And one last thing: keep an eye on it; check-in on your score and make sure that any issues you have resolved have been reflected in your Credit Report.
Keeping your goal in sight – owning your own home – is a great way to keep motivated and on the right track. Now that you have a plan in place to deal with your credit issues, you might like to have a chat with a lender about your goals and what you need to do to be mortgage-ready.
At RESIMAC, we’re focused on helping Kiwis overcome barriers to home ownership, particularly for those who have had a credit bump in the past.
We understand that life can be tricky and events like separation, health issues or simply having a tough time financially for a variety of reasons, can make the goal of home ownership seem out of reach. But as we said earlier, with a healthy dose of persistence, credit issues can be overcome, and getting some expert home loan guidance for your personal circumstances is a smart step.
If you’d like to talk through your home loan options and the plan to make it happen, give the RESIMAC Direct team a call. We’ll talk through how you can get mortgage-ready: a bit of a pep talk that will help you keep that goal of home ownership in sight.
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