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Critical considerations about credit score to keep in mind while opting for home loans

by Marquette Turner Luxury Homes

in Features, Money & Business, Variety

Not many of will be aware of the fact that a decent credit score is a pre-requisite when it comes to taking out a line of credit for a home loan. And, chances are even if you are aware, you wouldn’t know much about the benefits of a good credit score and what affects the annual credit report adversely. The following post is all about the critical facts you need to keep in mind regarding your credit report while going for mortgage loans

Let us start with the benefits of a high credit score.

Increase your approval metrics

The better your credit score, the higher are the chances of your loan amount getting approved. This is solely because the credit report is a parameter to measure your ability to repay the loan on time. If you are looking to get the application processed as quickly as possible, you need to maintain a perfect credit report. 

Increase the borrowing power

Since a high credit score means greater freedom and a high degree of loan eligibility, you can even take out a line of credit more than you require. 

Negotiate better with an excellent credit report

With a good credit score and annual report, you have leverage as to the status of your ability in making the repayment. This gives you higher power when it is about the negotiation of the loan amount, interest, and other stipulations. 

Next up, we have the amateur mistakes that affect the credit report adversely. It is always a good practice to keep away from such habits that lead you down a debt trap. 

Mistakes to look out for

Defaulting or delay on the repaying of loans

The primary discipline to follow with any line of credit is the timely repayment of the same. Late payments lead to defaulting of the payment, the interest rates go up, and the credit report is adversely impacted. You will get deemed as a risk and not a worthwhile investment. Be it the bank loans, car, housing, or even the simple credit card bills; always make the payments on time. 

Keep in mind the utilization of the borrowed credit

If you are excessively dependent on the borrowed funds, it presents a clear picture about the poor financial health and negatively affects the credit report. 

Number of times you apply for loans in a year

Yes, we do need multiple lines of credit from time to time. But that should never become a habit. If you are habitual applicator for loans and lines of credit from various investors, lenders, and financial institutions, your credit score will report that fact. This will make it harder for you to draw a new line of credit especially for a hefty investment like a home loan. 

Here are some tips to improve the credit score: http://www.creditsmart.org.au/know-your-credit-score/how-to-improve-your-credit-score/

Improve your overall credit report

To improve the annual credit report here is all that you need to do

  • Repay all the dues and within the stipulated time
  • Take out fewer lines of credit and apply for loans as judiciously as possible
  • The more you avoid multiple lines of credit the better it is for your annual credit report
  • Reduce the usage of credit cards, at least till you have paid off a significant portion of the dues 

Keep in mind all of the tips as mentioned above regarding your credit report while applying for a home loan. All the best!

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