Banker Bait

Question


Dear Scott,

My 18-year-old daughter lives at home, pays no board, works full time, and is saving for her first property. She also wants to buy a new car ($20,000) so she can get a credit rating, which will make it easier to get a home loan. Should she keep driving the old car and put all her money towards the house deposit, or get the car loan and take a bit longer to get into the property game?

Fiona

Scott's Answer


Hi Fiona,

Congratulations on raising such an ambitious daughter!

Now it’s up to you to teach her some common sense:

Spending $20,000 on a brand-new car will not help her buy a home in any way, shape or form.

Instead, she’ll just end up forking out roughly $30,000 for a car that will only be worth $10,000 in five years’ time.

The idea that you need to take out a loan so a bank will lend you more money is absurd.

Just like Sam Dastyari, the credit reporting agencies have done their darndest to convince everyone they’re more important than they really are.

Now it is true that if you’ve got something bad on your credit file it can be a red flag to lenders. But for a cleanskin, like your daughter, it’s really not a big deal.

What is a big deal for lenders is: 1) a stable income that can comfortably meet the proposed repayments; 2) a verified savings history; and 3) a meaty deposit (I recommend 20%).

If your daughter can tick those three boxes, she’ll get her loan.

Scott