When you are applying for any form of finance these days it pays to be completely honest with lenders about your credit and employment history and spending habits.
A recent study by leading global information services company Experian, which provides reports on consumer credit risk, found one in five Australian borrowers embellished or omitted important details on their loan approval forms. A further 60 per cent did not understand how loans were assessed.
But telling porkies to banks or brokers on your credit applications can backfire as lenders have more insights than ever before on your spending habits and credit history. Telling white lies can have a more severe impact on your ability to obtain finance than having a poor credit score in the first place.
It can be understandable why people might be hesitant to disclose the complete picture about their financial situation for fear of missing out.
Banks assess a borrower’s income, other loans and living expenses to calculate how much money can be put towards loan repayments.
In the current market, lenders are looking much harder at borrowers’ expenses by analysing credit card statements, transaction accounts and any recurring spending patterns. Expenses such as childcare, education, insurances, phone and Internet bills, groceries, medical costs, entertainment, recreation, travel and transport will be forensically examined.
If your bank account reveals a multitude of Uber Eats orders, overdue Afterpay bills, Netflix subscriptions, take away coffees and regular shopping forays at Dan Murphy’s, your spending habits might have to be addressed before applying for a loan.
The bottom line is banks are now able to delve deep into your credit history.
Honesty is always the best policy and the onus is on consumers to present a true picture to lenders.
