1. Cancel your credit card. You don’t need it for a credit rating. Paying off and cancelling credit cards before applying for a loan will increase borrowing power, as lenders base their assessment on the credit limit, regardless of the balance owed.
2. Do not use ‘Buy Now, Pay Later’ schemes such as AfterPay. Lenders may view buy-now, pay-later services as a red flag if an applicant’s usage exceeds their savings, questioning their ability to afford a loan. Missed payments on these services can also negatively impact credit scores.
3. Start saving for your mortgage repayment in addition to saving for a deposit. Save the equivalent of the expected monthly mortgage repayment to demonstrate financial discipline to lenders. A three-month saving history can prove dedication and willingness to pay the mortgage.
4. Gambling and cash withdrawals are red flags. Gambling, including lottery tickets, is considered a non-discretionary expense and will be factored into an applicant’s living expenses by lenders. Regular cash withdrawals are also a red flag, as lenders cannot track the money. Traceable minimal purchases are preferred.
5. Your HECS debt can impact your borrowing power. Higher Education Loan Program (HELP) debt is a liability that must be declared to a lender during the home loan application process and can impact borrowing power. Depending on whether your limiting criteria are servicing or deposit, seeking financial advice before paying off the debt is crucial.

With current interest rate increases, borrowing has become more challenging for many, as banks factor in a 2-3% buffer on top of the current rate when assessing serviceability. By implementing these small tips, prospective property buyers may increase their chances of being approved for a loan in a challenging market.