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“When providing credit to consumers, banks look to ensure that their investment in you is safe. The riskier the investment, the less likely that banks will approve financing for a homeloan,” she says.

“When applying for a bond, banks are going to scrutinise your credit rating. Therefore, a bad credit rating or an adverse listing on your name can seriously hinder your ability to secure homeloan finance,” she adds.

According to the Credit Bureau Monitor’s 2010 fourth-quarter report, only 53.3% (9.90 million) of the 18.51 million credit-active consumers in SA were classified as in good standing. The report also reveals that the number of consumers with impaired records increased to 8.61 million during the last quarter of 2010. This indicates deteriorations in the credit records of 120,000 consumers quarter on quarter and 426,000 year on year.

Geldenhuys says one of the main reasons bond applications are declined is because of the applicant’s credit profile.

“As a result of the National Credit Act and current market conditions, banks have tightened their lending criteria and a negative credit record may impact the result of your home loan application. To optimise your chance of securing your desired home loan, make sure you keep a clean credit record by ensuring that all of your accounts have been paid to date before you apply.

“Most retail stores and banks’ default listings will remain on a consumer’s credit profile for two years. If you do choose to close an account, settle the account balance and then contact the relevant credit provider to check that your name and record has been cleared. If you have a judgment on record, clear the account and then contact a litigation attorney to have the judgment rescinded.”

Geldenhuys adds that in order to keep a healthy credit score, consumers should ensure that they meet their monthly debt repayments on time.

“Even a payment that is only 24 hours late can be bad for your rating.”

She advises that it consumers fall behind on repayments, they should get back on track as soon as they can. “Always pay the minimum installment required and close accounts you don’t use.

“Credit providers assess the full facility of the credit agreements on record, even if they’re not being used.”

She also suggests drawing up a budget and sticking to it. Consumers are advised to boost their buying power and reduce their debt. “If possible, pay more than the minimum payment on your accounts to further improve your credit standing.

“If you can’t make a payment, talk to the relevant creditor about making an alternative payment plan and never ignore a letter of demand.”