HOW TO GET A GOOD CREDIT SCORE
The first thing a bank will do is check your credit score before giving you a home loan. So what is it & how do you improve that score to impress lenders?
Your credit score is a 3 digit number which indicates how likely you are to maintain your debt repayments. Banks will use your credit score to decide if they will extend credit for your home purchase. 5 elements of your credit score
Your payment history
Your level of debt
Your "credit age"
Number of credit enquiries
Your mix of creditWhat does a credit score mean?
You can think of your credit score like a report card, where different subjects have a different mark that makes up your final grade.
Pay your bills promptly (roughly 35%) ✅ Do you pay your bills promptly? Is there any history of late payments?
✅ A good score requires you to pay your bills on time.
Minimise your debt - (roughly 30%) ✅ Your debt amount + credit limits form your "credit utilisation".
✅ If this is high you may be close to your credit limit.
✅ So maybe reduce your credit balance to improve your score.
✅ For example: if you have a $2000 credit limit on your credit card, don’t exceed a debt of $600.
✅ Consolidate numerous line of credit so you're not paying too many debts.
Your credit history - (roughly 15%) ✅ A longer credit history provides more information about your finance management.
Reduce your credit applications - (roughly 10%) ✅ Many applications will have a negative impact. It makes you look too aggressive & desperate for credit.
Multiple credit accounts. So what now?
You should know your credit score before you start applying for loans. There may be inaccurate information hindering your score. You can confront this before applying to lenders.
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