What should I do when my home loan is not approved?

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A home loan that has not been approved does not mean the end of your property journey - it simply means that you will need to assess why it was declined and make the adjustments in order to be approved the next time you apply.

Don't immediately reapply

Avoid the urge to immediately reapply for a home loan with a different bank or lender. Too many applications for credit could very well be the reason why you have been rejected in the first place.

Instead, talk to your bank or lender to find out what the reason was for the rejection. Not only will you avoid the trap of too many applications, but you will also have a clearer picture of what to do to get your home loan approved.

Poor credit score

This is very common problem with applicants that might not be aware of the importance of a healthy credit score.

When banks assess whether to approve a home loan, their first step is to check your credit score.

If your credit score is rated poor – below 600, you should get a copy of your credit report from the credit bureau. The first thing you should do is check that your report doesn't have any errors.

If you identify errors on your credit report, the credit bureau should be notified of these and you should then take the necessary action to rectify the information displayed on the report. This will entail engaging with the credit provider who has provided the credit bureau with incorrect data.

If the information is correct and your poor credit score is the result of an impaired credit record due to bad debts or having no credit history whatsoever, further action will need to be taken.

Ways to improve your credit score:

  • If your poor credit score is due to a lack of credit history (meaning you have no record of being able to pay back loans or credit) you should begin by opening small retail accounts or cell phone contract.
  • If you have a low credit score due to an impaired credit record, you will need to try and settle your debt as quickly as possible.
  • Pay your bills on time.
  • Settle and close accounts.
  • Pay more than the minimum instalments on existing debts.
  • Avoid applying for additional credit over this period.

If you’re applying for a home loan alongside a partner or are married in community of property, then your partner will need to follow the same steps.

Work with a professional

Work alongside a trusted home loan expert - before you start the home loan journey. They will be able to help you not only apply for a home loan but can offer a pre-qualification certificate, and help you understand your credit score and help with credit rehabilitation if needed.

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