Locking down your first property, jetting overseas or backing your entrepreneurial idea – there are some things in life you may not be able to fund entirely from your pay cheque. The reality is that, at some point, you may need to apply for a credit card, personal loan or home loan so you can take the next step.
Here are five things that could possibly make or break your application for credit.
1. What you earn and what you owe
Can you afford to pay back any money you borrow on your current salary? Your income and outstanding debts, e.g. HELP – including how you’re paying those debts off – are important considerations for lenders.
Pro tip: If you’ve already got a credit card, don’t max it out every single month. If possible, only use a portion of the credit available to you and consider reducing your credit limit if you don’t need it.
2. Living expenses
You earn a decent amount and have a handle on your debts – great start. The next thing to focus on will be how much you spend on day-to-day things like rent, food, transport, clothing, entertainment etc. Basically, will you be able to afford the repayments on top of your other costs?
Try it out: Track your living expenses with our budget planner.
3. Your credit score
Everyone’s credit history is tracked and given a credit score; discover how yours is calculated. Credit reporting agencies rate how much debt you have and how reliable you are at paying it off. Maintaining a high credit score shows you’re good at managing your money.
Pro tip: Always pay your bills on time – you can see, track and pay bills in the CommBank app.
Myth-buster: A low credit score does not stay with you for life. You can always improve your credit score by paying your bills, rent, loans for example on time, every time.
4. Asking to borrow too much
This is more for home and car loans – it’s to check that what you’re buying is actually worth the amount you’re asking to borrow. This is to safeguard you just as much as the lender. You don’t want to take on unmanageable debt for something that’s not worth the amount you’re borrowing.
5. Your assets
Being a smart saver is going to help with this one. Lenders look at things like how much you’ve got in your savings and stocks, so they can get a complete picture of your finances as well as an idea of your saving habits.