After a hangover? Pay attention to the impact on mortgage loan approval


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In the wake of Christmas spending, a financial expert warned that your post-payment habits could negatively impact your mortgage application.

Too frequent use of services like Afterpay has the potential to impact your loan application in two ways: first by lowering your credit score and by demonstrating bad money management habits to your lender. mortgage.

“Unfortunately, we are seeing younger clients getting carried away by the convenience of Afterpay, but they may not have disciplined spending and budgeting habits,” said financial broker Rose De Rossi, director of Diversfi in Perth.

“This can have an impact on their borrowing capacity when they apply for a bank loan. When applying for a bank loan of any type, any late payment will affect the panel of lenders (who are) available to help them, meaning they may need to consider borrowing. through a non-conforming lender at a higher rate or wait to have a clear credit history. “

Afterpay states that having an account with them “does not affect your credit rating, even if you pay late“, and as long as you use Afterpay responsibly and make your payments on time, your credit score and history should not be directly affected.

However, the potential for problems kicks in when you read the fine print of terms and conditions. Here Afterpay makes it clear that it reserves the right to check your credit and may report any negative activity on your account to credit reporting agencies.

Specifically, they say that by opening an account with them, you allow them to “report any negative activity on your Afterpay account (including late payments, missed payments, defaults or chargebacks) to rating agencies. of credit ”.


How using Afterpay, Zip or Openpay impacts your credit score



“To avoid ruining your future mortgage in favor of a few shiny Christmas gifts, set up an automatic debit on your service buy now pay later, maintain your repayments and then close the account once the purchase is paid off”, De Rossi informed.

She added that since the Royal Commission and the tightening of lending criteria led by APRA, banks and lenders are performing “a more forensic examination of a client’s living expenses,” which includes discretionary spending. .

“Afterpay accounts are essentially a store credit card and the monthly commitments on these accounts are calculated in exactly the same way as a bank credit card, which is typically 3.8% of the account limit,” he said. she declared.

“If you are currently using Afterpay and want to buy a house in 2021, my suggestion would be to close the account completely. Afterpay is typically used for one purchase at a time, so once you’ve paid for it, close the account and receive confirmation. Lenders will want to see proof that the account was closed, because the repayment does not trigger the closure. “

Paying off your account balance in full becomes an even higher priority if you have an overdue Afterpay account, she said, so you need to clean up your finances before applying for a loan.

“Anyone planning to apply for a home loan this year should start tracking their monthly expenses,” she said.

“Avoid regular gambling, lower your Uber Eats, check your credit card limits and lower them to manageable and realistic levels – then save, save, save!”

Find out how important your credit history is when you apply for a home loan.

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