How important is an established credit history?


Your credit history, Two Red Shoes mortgage broker

I’ve been asked the following question by a gorgeous mum looking after her 20-something son, he is a really great saver and has saved enough money to purchase a car outright (good on him!) but her question is, should he take out a loan for the car anyway to establish a credit history for when he’s ready (down the track) to buy a home?

This goes to the old school thinking that we need to show that we have successfully repaid loans in order to qualify for a home loan.

If you have a mobile phone (chances are) you have a credit history.

While this never hurts, where it’s at today is more about the savings history speaks loudest. Your savings history shows how good you are with money – and this combines with your balance sheet (assets vs your liabilities) to form a big part of assessment criteria.

What about your credit history - obviously a good credit history is important, but if you have a post paid mobile phone then you have a credit history. Up until last year the way this was handled was a little mark that says a credit provider has looked at you combined with nothing that says you haven’t made your payments then you have a good credit history. This was called a negative credit history regime – only negative stuff was recorded and the absence of negative stuff was good.

Last year we changed modes; and some lenders are still catching up, but now we have ‘positive’ credit reporting, where lenders are reporting that you did make your payments on time, or you did – but it was a day late, or you did – but it was a few days late – or you d