Are your SMSF loans affected by your bad credit rating?

What do lenders think of a low credit rating?

Usually, banks and lenders do not approve SMSF lending applications for people who hold poor credit scores. The concept of SMSF lending is relatively new in the credit world; therefore, lending policies tend to be rigid and lack flexibility. This means there’s very little leniency for applications that carry poor credit history. 

Banks are primarily interested in the trust income of your self-managed super fund and whether there is enough liquidity in the fund for you to afford the mortgage.

However, because you are the trustee making the guarantee, they will also consider your asset-to-liability position, as well as your credit history. Lenders ready to provide you with an SMSF loan despite your bad credit position will charge you a higher interest rate due to a higher risk for SMSF lending.

The good news is that at SMSF Loan Experts, we have professional affiliations with prime lenders who can approve loans to SMSFs with normal rates and fees.

How to get approved for an SMSF loan despite having bad credit

If you want to get approved for an SMSF loan despite your bad credit rating, you’ll need to tell your lender how much the defaults were for, when they occurred and whether they’re now paid or unpaid. They’ll also like to know how long it’s been since you incurred a bad credit listing and how you’ve moved past the life event. The best way to make your case strong is by providing them with as much evidence as you can.

Top tips to help improve your credit score  

If you’re wondering ‘how can I fix my credit?’ here are some of the dos and don’ts when taking action to repair your credit file.

Do

Review the information on your credit file for accuracy.

Investigate any incorrect information. An error can occur on such as having overdue bills incorrectly listed. You can have this removed simply by making a few phone calls. It’s worth it if it means you improve your credit score as a result! 

While it’s legally impossible for a third party to magically repair your credit report for you, credit file repair companies can manage your credit repair process and dispute any incorrect information on your behalf. We work closely with a successful credit repair company and can refer you if you’d like. 

Make your repayments on time.

Missed payments are recorded on your credit report and can negatively impact your score if you leave it too long. In fact, it could even end up in a default which is seen as a strike against your name. By making your repayments on time, you can help demonstrate your worthiness of borrowing money and your ability to repay debts. 

Refinance if viable.

If your poor credit score results from too many defaults and missed payments, look into whether you’re able to potentially refinance your outstanding debt. Not only could this save you interest, but you may also be able to consolidate your debts, making it easier to manage and, more importantly, easier to meet your repayments! 

Don’t

Make multiple credit applications

The road to a successful credit application can be both exciting and frustrating. If one application is rejected, resist the urge to apply for credit with multiple other credit providers, as this reflects poorly on your credit file. Instead, choose to understand the reason behind the decline and work to remedy any areas that require attention before applying again.  

Give up

It can feel impossible and unfair when trying to improve your credit file but don’t give up. By continuously taking the necessary steps to improve your credit file, you’ll be back in the green sooner than giving up and letting your financial future go down the drain. 

Don’t let a bad credit rating impact your financial future.

Call one of our experts on 1300 781 680 for a confidential discussion to determine your options. Please note, this professional service is for SMSF lending only; it only applies to applicants wishing to purchase property within their SMSF.