Anyone Experience Applying for a Homeloan with Large Number of Enquiries on Credit File?

gidxg03 on 06/10/2021 - 08:28

We have had an offer accepted on a new home and we were thinking of keeping our existing home potentially renting it out. As such we are looking for quite a bit of money to borrow but within our borrowing range.

We churn and burn credit cards for qantas points but have no late payments or defaults on file. Our credit scores on credit savvy is excellent (900+)

We are using a broker for the finance and he has just send me an equifax report on both me and my partner and he’s concerned the number of enquiries on file is going to impact our ability to get finance. His scores are showing good.

Anyone have any experience in this area? Is he being over cautious? We refinanced about 18 months ago and had no issues. Our borrowing power is very strong and we have good equity in our current home.

Any advice or experiences would be much appreciated as my wife I ready to kill me as the credit card churn and burn was my idea!

Financial Home Loan Loan

Comments

  • bemybubble on 06/10/2021 - 08:32
    +7

    All it does is raise the question - so long as you have an answer to their question you'll be fine.

    • trotsky on 06/10/2021 - 09:33
      +6

      This, OP. My response to them would be something along the lines of:

      "With the financial position and excellent servicing capabilities that we have, lenders were enthusiastically offering us promotions to take up credit card offers and we did so to leverage the benefits of our financial position, not because we needed the credit. Given our priorities have now changed, we've closed off (all|most) of these products and will not be looking to take up others, and in closing them off we have demonstrated full serviceability and no need for the credit."

      Also, keep in mind that an enquiry shows them only one side of the equation (that you applied). Offer to show them the closed statements so they can see that you got the cards successfully and they'll clearly see that all the enquiries were fulfilled, ie you were not desperately looking for credit, banks were looking for you.

  • redfox1200 on 06/10/2021 - 08:49
    +3

    mine was about 600 when i applied for the last loan with 20+ enquiries, the bank just wanted an excel spreadsheet confirming what accounts were still open or closed. no issues. As long as it's within your borrowing capacity they should not care much

  • idonteven on 06/10/2021 - 08:52
    +3

    I've got the opposite issue, I tried to open a new ANZ black for the point but they rejected me as I had a mortgage.

  • Duckie2hh on 06/10/2021 - 08:59

    How many enquiries in the past 12 months?

  • dust on 06/10/2021 - 09:19
    +3

    As far as I know, Australian banks don't really use the credit scores in the same way American banks do. They use their own calculation. So your score on Credit Savvy doesn't have much impact on home loan approval.

  • Big Lenny on 06/10/2021 - 09:28
    +1

    mate, all they care about is how much deposit you have and that you have a full time job.

    • Mulga Bill on 06/10/2021 - 10:23
      +4

      I disagree this is all they care about, while these are important there are may other aspects of lending such as
      - repayment history
      - source of deposit
      - length of employment
      - purpose of funds
      - exit strategy (how you play to pay it back)
      - financial hardship
      - suitability of the product
      - valuations
      - Covid-19
      - change of circumstances
      - debt to income levels
      - loan to value ratios
      etc…

    • [Deactivated] on 06/10/2021 - 12:40

      all they care about is how much deposit you have and that you have a full time job

      ASIC isn't here on OzBargain AFAIK, but if they were I suspect they'd point you at RG 209 and suggest you fill some gaps in your knowledge.

      • miwahni on 06/10/2021 - 23:11

        While RG 209 covers off on legislative requirements it doesn't touch on individual banks' credit policies which are much more comprehensive than just RG 209. Mulga Bill seems to have a pretty good grasp of his subject.

        • [Deactivated] on 07/10/2021 - 07:39

          I know. I was agreeing with Mulga Bill and rejecting Big Lenny's "all they care about" assertion.

  • donbot on 06/10/2021 - 09:57
    +3

    I went through this about 4-5months ago. Both partner & I had massive amounts of credit applications due to FF card promos in recent years (20+ for my wife, 30+ for me) . I was open to the broker about it, who was open to the lender about it - all they wanted to know is that any card listed as 'open' on equifax was correctly listed - if it was closed, they wanted to see the letter confirming closure. They could also see every card was always paid on time, so no late payments noted.

    Apparently they wanted to see equifax score above 700 - which we scraped in by in the low 700s. I think it may have been a policy thing for the lender.. unsure.

    In any event, my brokers advice was to be open and upfront about it so they can address it in the formal application - answer the question upfront, and they wont care. If you cant explain it, then you may face difficulties.

  • Mulga Bill on 06/10/2021 - 10:16
    +3

    I am a lender for a bank. With the new Comprehensive Credit Reporting (CCR) we see a lot more info. It shows all of the credit inquires you have made, all the credit facilities you have open or when they were closed, their balance and original approved amount and their repayment history (RHI) (apart from some smaller lenders who don't subscribe to the new CCR). The RHI basically shows how often you have been more than 2 weeks late on a payment.

    A high number of credit inquiries is a red flag as statistically customer are more likely to default. It also confirms what you have said about churn and burn with the credit cards and refinancing your home loan - with the cost of refinancing you over, discounting rates, waiving fees and providing cash backs to win the business just for you to potentially refinance again in 18 months anyway - some banks may work that way but personally I would prefer to focus on a long term customer.

    Saying that you have a reason for the inquiries so can explain them so as long as the broker has some strong notes around this you will probably find a lender who can help you…just maybe not one offering the lowest interest rate.

    All the best with your new purchase.

    • [Deactivated] on 06/10/2021 - 12:52
      +2

      A high number of credit inquiries is a red flag as statistically customer are more likely to default.

      Credit risk 101 😉

      RG 209.99 "….risk indicators, such as debt-to-income ratios and credit scores, may be considered to determine the likelihood that a consumer will default…"

    • miwahni on 06/10/2021 - 23:12

      I find it amusing that Macquarie reports car leases but not mortgages.

  • Fever4shakin on 06/10/2021 - 10:17
    +2

    I applied for a home loan earlier in the year. I had to go through their list of credit enquiries to confirm if the application had proceeded or not, and if so which were closed. I also had to provide proof of the more recently closed credit cards or lowered credit limits. They even went so far as to pick up a payment made to Amex from my bank statement (final payment upon closing the card) and ask for proof of closure for that card. It was a pain, but the biggest thing they care about is your debt to income ratio.

    • ozprash on 06/10/2021 - 11:44

      Do you know if I do not have proof of the card closure (shredded the closure letter as part of drawer cleanup), any other proof that can be provided?

      • Fever4shakin on 06/10/2021 - 13:05
        +1

        Go through your emails and see if they sent anything confirming the closure, you may also be able to find something in your online banking depending on the bank. Your only other option would be to contact the bank and ask them to send out something, they can usually do this by email but it can take a few days.

      • miwahni on 06/10/2021 - 23:15
        +1

        How long ago did you close it? If the bank has reported it as closed to Equifax then it will be updated on your credit report as a closed facility. If it was closed within the last month you may need to provide evidence though. Can you still access your internet banking and show that there is a NIL limit on the card? Or print out your closing statement which could show a NIL limit? Failing any of that you will need to contact the bank.

        • ozprash on 07/10/2021 - 10:19

          Ah, that's better. Thanks! I have the closure letter for a couple I closed earlier this year. It's only for 2 cards in 2018 that I don't have the letter now. But can confirm they are showing closed in Equifax.

  • gidxg03 on 06/10/2021 - 12:55
    +3

    Thanks all for the comments and advice. So we have been approved by at least one lender today.

    Lesson learnt though we were knocked back by quite a few on the fact we had a lot of enquiries and accounts (I’m talking 20+ for me and about 12 for my wife over 5 years).

    I think Mulga Bulls comments are spot on and line up with our experience. I should say though we are looking for about $1.5M finance (on about $2.4M equity). Might not be an issue if we were just looking for $300k on a loan top up.

    Might just be some advice here for anyone reading this in the future if you are facing the same scenario.

  • Adrian Player on 09/10/2021 - 21:58

    My advice is speak to experienced brokers and lenders that know what they are talking about not randoms on the internet.

  • LemonShapedRock on 10/10/2021 - 16:09
    Merged from How many Credit Enquiries is too many?

    Howdy - I’m preparing for a home loan and was wondering how many credit enquiries is considered too many on a credit report in the last 5 years?

    Is there a set number, or is there another way this is looked at.

    Thanks

    • FLICKIT on 10/10/2021 - 16:14
      +3

      This may be helpful:
      https://www.ozbargain.com.au/node/655429

    • mskeggs on 10/10/2021 - 16:18
      +2

      You’ll be fine if you have had fewer than half a dozen or so, a phone plan, a car loan, a couple of credit cards is normal.
      If you have had dozens, credit providers will start from a position that you have had credit difficulties and needed to use a bunch of providers, so will look more closely.
      If there are no late or missed payments, they will view that positively.
      If there are lots of accounts that are still open, or not recorded as closed, they will count all the open credit amounts as being maxed out when they calculate your borrowing ability.

    • AirbusA389 on 10/10/2021 - 16:49
      +3

      personal experience: 8 credit enquiries for 8 credit card application within 18 months, 5 approved, 3 rejected due to casual income. my mortgage broker said the enquiries for past 24 months will play a major role in home loan application.

      CBA approved my mortgage, Genworth rejected my LMI application. Genworth didn't care about how i used my cc. I was churning cc for qantas points. All bills paid before due date, never missed a payment.

      Credit score dropped from 780 to 526. FML. Credit score recovered within 2-3 months, but Genworth only saw score 526 + 8 cc enquiries.

      never again. be a good kid and stick to 1 - 2 cc every 12 months.

      abstinence is virtue.

      • deme on 10/10/2021 - 17:46
        +1

        Or just get a 20% deposit and no need to worry about LMI

        • lachhelix on 10/10/2021 - 17:50
          +5

          "just get"

          • deme on 10/10/2021 - 17:52
            +2

            @lachhelix: If you can't get the 20% can you really afford the loan?

            • plmko on 10/10/2021 - 17:55

              @deme: ^This

              • mskeggs on 10/10/2021 - 18:21

                @plmko: I think this is pretty rough.
                The way house prices have risen in the last decade, there would have only been a few brief periods where buying with a 5% or 10% deposit would not have cost you less than saving longer for a bigger deposit. Even with mortgage insurance and the extra interest, because prices have risen so unreasonably fast compared to the slow pace of savings.

          • pharkurnell on 10/10/2021 - 18:21

            @lachhelix: yea just down behind the cushions on the lounge.

      • LemonShapedRock on 10/10/2021 - 17:55

        Yeah unfortunately CC churning looks a lot like debt stress on a Credit Report.

        Good insights thank you

        • deme on 10/10/2021 - 17:55

          There wasn't an issue for me, I closed them all before the loan and not a peep about it. Maybe things have changed?

        • AirbusA389 on 10/10/2021 - 18:20

          there are mortgage brokers with access to banks with delegated underwriting authority. that's a major workaround. I was lucky to chance upon someone in Sydney with knowledge and access to this facility. So much more professional and knowledgeable to my previous broker. drop me a PM if you want her contact.

          disclaimer: your finance matters is yours to deal with, YMMV with my broker.

          need the cash to maintain my Airbus A380-900 in Alice Springs.. =)

    • rektrading on 10/10/2021 - 18:42
      +3

      A 5%, 10% or 20% deposit won't make a difference for a 30Y loan.

      The most important thing is for people to borrow as much as possible and get in the market ASAP. Every month that people wait to enter the market is another month of lost gains.

      Australian property prices are $103,400 higher than last year, CoreLogic says
      By business reporter David Chau
      Posted Wed 1 Sep 2021 at 9:58amWednesday 1 Sep 2021 at 9:58am, updated Wed 1 Sep 2021 at 2:29pm
      https://www.abc.net.au/news/2021-09-01/property-housing-core…

      Prices will shoot up even faster when Australia opens its borders to international buyers. People that don't get in now will never be able to buy later.

    • Waltervp on 11/10/2021 - 09:42
      +2

      When i worked in an optus call centre a decade ago and we saw a mention of a refused application for another telco denied in past 3 months we would advise their application for a phone plan was rejected due to not meeting optus criteria…

      Personally I am a disability pensioner and westpac won't even extend my 235k mortgage to 240k to help me get solar panels. My anz credit card has a large credit facility and that is counted as debt as well. Even though I paid for a westpac mortgage plan that includes a premium card they wouldn't issue me one due to lack of income. They don't care my credit rating is great and I pay $250pa for my ANZ Visa… they suggest I cancel that card and then maybe I may be successful. I can't risk losing that one card just because it's my travel insurance and frequent flyer source.

      I wished I could easily churn to get points or to get better deals, but it's not that easy. As a low income person there are so many factors in your way to save money. As an example, you can't afford to buy bulk anything or buy quality that will last. You try to get away buying second hand or cheap items that break or buy from FB market place etc and get ripped off by unethical people sometimes (I'm very careful and it mostly doesn't happen).

      But I'm actually doing really well myself because I've learned over a lifetime making do with a small income due to my (invisible!!) disability - cystic fibrosis. I certainly feel great empathy for people who due to fate end up on minimal incomes at a later age. I do have solar now and I do manage to churn cards every few years… but nothing is straight forward when you have little income!!!

  • the Unforgiven on 11/10/2021 - 12:16
    +1

    I was on finder.com.au a few years ago, and I used their credit checker. I didn't log out of Finder & every month my credit score took a hit as it was 'being pinged'. It took awhile for me to put 2 + 2 together as I did other loans enquiries. As soon as I logged into Finder & then logged out, the pinging stopped, but not before my score was down a lot; I don't log into Finder anymore as my credit score has finally got back up to 802; it was as low as ~650, I have had 13 credit enquiries on my file!

    Use Credit Savvy to check your credit score. Here is the breakdown that Experian uses to determine your score:-
    63% Account information - This includes repayment status history, payment terms, credit limit, account type, and account open and close date
    31% Enquiry Information - This includes account type, requested limit, enquiry date, and industry
    5% Adverse Information - This includes defaults, relationships with speciality finance providers, and serious credit infringements
    1% Public Information - This includes court actions, bankruptcy orders, debt agreements, and personal insolvency agreements

    I hope this helps

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