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The latest smartphone could cost you a home loan

Premium phones can cost $2,000 these days, so many people buy on contracts or instalments – but this could mean trouble later. (Images: Getty, Apple, Samsung)

Australians are warned that their enthusiasm for the latest smartphone could end up with a rejection of their home loan application.

According to credit repair law firm MyCRA Lawyers, expensive phones bought on long-term contracts or buy-now-pay-later plans could have a lasting financial impact.

"You'd be amazed how often something simple as buying a new phone can snowball into a full-blown credit crisis for some people," said MyCRA chief executive Graham Doessel.

The telecommunications company would likely perform a credit check when signing a customer to a contract, Doessel said, and some buy-now-pay-later providers would do the same.

"Once you have a few of these in a short period on your credit file you run the risk of being rejected outright for a home loan," he said.

"Some lenders treat buy-now-pay-later services the same as payday lenders, which means an automatic rejection."

Telcos are a common cause of default on a credit file, according to MyCRA.

"While a default won’t necessarily rule you out of getting a home loan, it will certainly be enough for your bank to see you as a risk and therefore apply a higher interest rate, which may price you out of the market," said Doessel.

He said it's disturbingly easy to ruin the chances of buying a house with a simple instalment purchase like a phone.

"Shopping around for credit – whether it be a buy-now-pay-later lender, credit card deal, or other personal loans that require a credit check – can see you ruining your credit score in a matter of days and lock you out of a housing market for two years or more."

MyCRA runs a webpage, Freecreditrating.com.au, where Australians can self-check the health of their credit rating. The law firm specialises in having any "black marks" removed from a person's file.

"Credit providers have to follow very strict rules when it comes to marking a person’s credit file and if they don’t follow them we can have the black marks removed," said Doessel.

"It is absolutely worth looking into because it can be the difference between getting a loan and not getting one, or saving thousands of dollars in interest every year."

MyCRA's warning is similar to previous reports that lenders now look at everyday spending commitments like entertainment streaming subscriptions in considering home loan applications.

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