Buying Your First Home? Start With Your Credit Record

For many first-time home buyers, obtaining a home loan is one of the most important steps in their home-buying journey. While affordability and income are important considerations, banks will also assess your credit profile before deciding whether to approve your home loan. Your credit record influences not only whether your bond is approved, but also the interest rate offered and, ultimately, the price range of the property you are likely to qualify for.

Your credit profile is a record of your financial behaviour. A healthy credit record can improve your chances of bond approval and may assist in securing a more favourable interest rate. Even a small difference in interest rates can have a meaningful impact on monthly bond repayments over the term of a home loan.

For first-time buyers, it is also important to understand that banks do not only consider whether you earn enough to qualify for a bond. They will also access your existing financial commitments, repayment history and overall ability to manage monthly debt obligations. Reducing unnecessary debt, keeping your accounts up to date and avoiding large credit purchases shortly before applying for a home loan may help strengthen your credit profile.

Adverse credit information, such as payment defaults, accounts in arrears, debt review or civil judgments, may significantly affect your ability to obtain finance. Although settling the debt is an important first step, it does not automatically remove the adverse credit information from your credit record. Additional steps may still be required to ensure the relevant credit bureau records are updated and where applicable, that the legal processes have been completed.

How to address credit record issues before applying for a home loan:

1. Obtain a copy of your credit report and check that all the information is correctly reflected.

a. If there are errors, you can lodge a dispute with the credit bureau online (such as TransUnion, Experian or XDS).

b. Keep supporting documents available, such as proof of payment or evidence that the judgment has been satisfied.

2. If the debt has been settled but still reflects as unpaid, obtain and submit written confirmation that the debt has been settled.

3. Consider applying for rescission (setting aside) of judgment if the judgment was granted incorrectly or there are legal grounds for the judgment to be set aside. Rescission is a legal process and is not automatically available in every case.

4. Follow up with the relevant credit bureau to ensure that the updated information has been recorded correctly.

Checking your credit record before applying for a home loan allows you to identify and address any issues before they affect your bond application. Many buyers only discover credit-related concerns after they have signed an Offer to Purchase and submitted a home loan application.

Buying your first home is an exciting milestone, but it is also one of the biggest financial commitments you are likely to make. Preparing your credit record before signing an Offer to Purchase may improve prospects of bond approval, assist in securing favourable finance terms and reduce delays during the transfer process.

Written by: Micaela Hermans and Maret Carroll
Moderated and approved by: Rohula Kgabu-Mnyayi

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