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How one small mistake can cost you a home loan

Did you know that just one forgotten electricity bill or unpaid mobile phone invoice could make or break your home loan application? Did you also know that an unpaid bill of just $100 or more can smear your credit file for up to seven years. The fact is, it doesn't take much for your credit file to end up with a black mark against it. Many potential borrowers are unaware that they have defaults until a loan application is submitted.

Potential borrowers need to know that their debt history, such as bill defaults, applications for loans and credit cards, are on file and are made available to lenders and other credit providers. If you have been active in applying for credit within the last five years - such as store cards, credit cards, personal loans and mobile phone contracts - then all of this information will be stored on your credit file. One or two debt-related mistakes, such as a missed or late bill payment, are often enough reason for someone to be denied a home loan.

If you have not met deadlines with bills or other debt payments in that time, then that will also be kept on file for five to seven years.

Defaults are preventable in many cases. If you're unable to meet repayments contact your lender or credit provider and make arrangements to pay the outstanding balance, before a default is noted on your credit. Other tips to keep your record clean include automating accounts so bills are paid automatically, saying no to credit cards or increasing your limits, not going over your credit card limit, and paying more than the minimum repayment.

Source: Your Mortgage