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9 Dec 2016

LENDING FOR CUSTOMERS WITH BAD CREDIT

It is no secret that a poor credit history will make it more difficult to obtain credit (being one of the key components in risk profiling). Generally, the major lenders and top tier of pricing will not consider an application for a customer with poor credit history. The non-conforming market specialize in assisting this type of customer, however at a premium rate and fee structure. Many non-conforming lenders will base the rate on the severity of the customer’s credit history (in the mortgage market the level of deposit will also play a part). The rule of thumb is that non-conforming lenders are happy to lend to customers that have a life experience that has resulted in bad credit, however can now show that they are getting back on track. This means that you could have incurred several defaults 1 or 2 years ago due to relationship breakdown, sickness, loss of employment, etc. If this is the case and finances are back on track, there are 3 main things that can be done to improve your risk profile:

  1. Arrange a payment plan – arrange to pay the defaults over a period of time via a payment plan. This could be minimal (e.g. $20 per fortnight), however it shows that you are serious about getting your finances on track
  2. Account conduct – the best way to evidence your current financial position is through bank account conduct. As we now live in a world of account ‘credits’ and ‘debits’, bank statements will show how you manage your finances. It is also positive to evidence accumulated savings (if only minimal).
  3. Stability – you can improve your profile by evidencing stability in employment and residence. Long term employment and rental via a real estate agent are seen as positive attributes to non-conforming lenders.

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