However, there is question that arises from being interested in different home loan products: Will multiple loan applications affect your credit rating? Does this apply to other loans and debts that you may have? The answer is both yes and no, as we explain in detail below.
Should I apply to multiple lenders?
It’s generally not a good idea to apply to multiple providers at once. When you apply to several lenders, every application will appear on your credit report, which can be accessed by any financial institution you do business with. Multiple loan applications don’t exactly endear you to a lender, because it can be seen as negotiating in bad faith.
It’s a much better idea to do your research first and compare home loan products, and only apply for a loan (or apply for pre-approval) once you’ve picked the right loan for your needs. Follow our checklist for choosing a home loan if you’re not sure what to look for, then compare products on our database:
Will multiple loan applications affect my credit rating?
The good news is that applying to multiple lenders won’t have a huge impact upon your credit rating. It may be a practice that’s somewhat frowned upon by lenders, and it doesn’t look great on your credit history, but you haven’t done anything to suggest that you’d be unable to repay a loan.
The major things that negatively impact your credit rating are missing repayments or late repayments on your home loan or your credit card, defaulting on loans, or filing for bankruptcy – all of which are pretty obvious indicators that you haven’t been able to repay your debts! If any of these have happened to you in the past, don’t worry: there are several actions you can take to improve your credit score.
How can I maximise my chances of being approved?
A good credit report is important, but it’s only one factor that your financial institution will look at when you apply for a home loan. You can do several more things to maximise your chances, including paying off any existing debts, building up your savings, having a steady income, and above all, being transparent and up-front in your discussions with your lender.
For a comprehensive guide to getting the home loan you want, check out our tips for getting approved for a home loan.