Credit Check Process on Mortgage Loan

paul11 on 12/11/2022 - 15:34
Last edited 13/11/2022 - 13:18 by 1 other user

I applied for a mortgage along with all the relevant documents. Right on the 2nd day, the bank did a credit check. After 3 weeks they came back and rejected my application saying that I have a casual job.

My question is that can't they check my documentation first, before they do a credit check. If they just want to refuse the application on the basis of "type of employment" they can just see the "employment contract" at the start and refuse straight away. Why ruin people's credit scores? I even told my employment status to the loan officer I spoke to at the bank even before I submitted my application. She said submit all the docs and they will see.

Really tired of large corporations playing with people's data in this country. Let me know your thoughts.

EDIT 1: I am in this casual job for the last 3+ years. It a rolling annual contract. I earn over $200K/year and have $150K in savings and the loan requested was $750K. My credit score is in high 700's. No liabilities or loans.

Also, wondering if there is any agency like this here in Australia for a credit discrimination complaint?

EDIT 2: Thanks everyone for their (good and bad) suggestions. I have always thought that if you have a stable job, good credit score and cash flow then going via a broker may not make any difference, but seems like I was wrong!

Thanks

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  dcep on 12/11/2022 - 15:38

  So I applied for a mortgage along with all the relevant documents. Right on the 2nd day, the bank did a credit check. After 3 weeks they came back and rejected my application saying that I have a casual job. My question is can't they check my documentation first, before they do a credit card. If they just want to refuse the application on the basis of "type of employment" they can just see the "employment contract" and refuse straight away. Why ruin people's credit scores ? I even told my employment status to the loan officer I spoke to at the bank even before I submitted my application. She said submit all the docs and they will see. Really tired of large corporations playing with people's data in this country. Let me know your thoughts.

  Fixed.

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  AustriaBargain on 12/11/2022 - 16:04

  Any chance you can get your boss to make you permanent? That'd solve your problem. You'd effectively be asking for a raise though, if your hourly rate needs to stay the same for your loan application.

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  Hybroid on 12/11/2022 - 16:10

  +2

  Banks do a full risk analysis based on a series of criteria that suit them.

  Your specific profile was deemed too risky as a casual employee amongst your other data too. Others may not be the case and be accepted even as casuals because they fulfil other criteria.

  That’s why applications get reviews on a case by case basis.

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    jjjaar on 12/11/2022 - 16:12

    If it was a combination of employment and credit check outcomes, they shouldn’t just cite “casual” as the reason for rejection.

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      freefall101 on 12/11/2022 - 16:37

      Because there probably wasn't a clear secondary reason or something specific about the nature of the employment.

      Casual work might be fine if you have enough capital, or investment income, or have a lot of free cash flow, or have been in that job a long time (because there are laws protecting long term casual workers now) or just a culmination of every other risk factor they measure. There's no point listing all of them though, just tell people the main one. Get a full time job and you'll get a loan, telling people to find another $500k for the deposit while keeping their casual job isn't really useful advice.

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  Aussiebargainer on 12/11/2022 - 16:33

  +2

  The point of a credit file is that it stamps an inquiry each time you apply for credit.

  The first stage is to run a credit check as this removes processing time for the bank for people who have a low score, the bank can auto decline. The fact that they asked for your paperwork means you passed the credit check but failed to meet serviceability on the loan due to having a casual job.

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  tsunamisurfer on 12/11/2022 - 17:15

  Why ruin people's credit scores?

  You ruined your own score by going for a mortgage while on a casual job.

  Why ruin people's credit scores? I even told my employment status to the loan officer I spoke to at the bank even before I submitted my application. She said submit all the docs and they will see.

  I have worked in this field. The loans officer is not there to determine your eligibility for a loan. His job is to get you to submit a complete application and let the computer do the rest.

  I would go as far as to say he actually doesn't know the reason your application is rejected, he suspects (as a strong and valid guess) that it was your employment status.

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  El-Rhi on 12/11/2022 - 17:27

  +1

  Why ruin people's credit scores?

  How much was your score impacted?

  You know that mortgage enquiries generally increase your credit score right? It’s the other forms of credit e.g personal loans that might lower it slightly

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    dcep on 12/11/2022 - 18:26

    I went xxx bank for pre-approval , then settled with a different bank on homeloan finance but not without being asked why my credit file has $700k loan with xxx bank last month. I was like, wtf ?

    I wonder what others' credit file looks like when they went shopping with 3 or 4 pre-approvals.

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  Tee Rex Arms on 12/11/2022 - 20:32

  +1

  Credit discrimination complaint?! What a wan (fill in the rest)

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  johndowy on 12/11/2022 - 20:47

  +1

  What kind of casual work do you do?

  If it's casual in the 'adult' industry, then they may not look favourably even if you are earning $200k a year.

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    paul11 on 12/11/2022 - 22:02

    Software Programmer

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  avoidfullprice on 12/11/2022 - 22:19

  Really tired of large corporations playing with people's data in this country. Let me know your thoughts.

  If they don’t have need for people’s data, you will find they will have lot less demands for software programmers. My thoughts.

  Also, sorry you got rejected. Hope you cope better in dating scene and don’t expect first date means automatically qualify for a home run. I mean how dare he suss me out first BEFORE deciding if he wants to go through with this relationship.

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  miwahni on 12/11/2022 - 23:04

  +3

  The first step in most banks' process is to run credit check, to check on creditworthiness. Then if all okay, proceed to actual assessment. I'm assuming you went directly to the bank? This is a good example of an instance where a broker would have been of great assistance - brokers generally know who will accept casual contractors on rolling contracts, and only submit applications to those institutions, thereby avoiding unnecessary hits to your credit report.
  Good luck with getting your loan, all the same, hope it works out for you.

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  Quantumcat on 13/11/2022 - 09:28

  +3

  You need to use a mortgage broker, not apply directly to the bank. Different banks look on different circumstances differently, some might think something is a deal breaker and others think it is fine. A broker will know which banks will not mind long term contracts. Then you won't be wasting your time applying at banks who won't approve you.

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  Gunnar on 13/11/2022 - 22:58

  +1

  As above, use a good broker for you loan applications. You can get all the questions you want from them and even ask them what the impact of this will be on your credit score for doing an application

  The best part of using a broker is that they do all the work with banks for you (and also tell you which banks are a pain to deal with, ask them this question becuase it will save you a ton of stress if a bank is crap to deal with and you have a settlement looming)