In the world of finances, there are a number of factors that are crucial to your home loan application. One of the important factors is your credit score. When you apply for any type of loan with the help of a mortgage broker in Brisbane, your credit score determines your eligibility to obtain a loan with favourable terms. Read on to learn why credit scores are important in the home loan application process and how to boost it.
What Is Credit Score?
Before we learn about the significance of credit score in the home loan process, it is essential to know what exactly credit score is. A credit score refers to your creditworthiness to obtain a loan. It is a numerical value that ranges between 300 to 850. The credit score, which is a three-digit number, determines whether you are eligible to obtain a home loan with the help of a finance broker in Brisbane.
The number of your credit score is assessed by various factors such as payment history, credit utilisation, length of credit accounts and recent credit inquiries. The number of your credit score decides whether you get a loan or not, and if you do, then what will be the value of the loan? This means the higher the value of the edit score, the higher your chances of getting a loan under favourable conditions.
The Significance Of Credit Score In The Home Loan Process
Your credit score is the first thing that the mortgage broker in Brisbane will assess before initiating the process of the loan. This is because your credit score shows your credibility in repaying the loan without any interruptions. The credit score assures the lender that you are not a risky bet and enables you to get a high-value loan.
The credit score provides valuable insight into your financial responsibility and the ability to make repayments for the loan. Lenders tend to offer more favourable terms and conditions to individuals who have a higher credit score rather than the ones with lower credit scores. The borrowers who have a lower credit score may be able to get a loan, but they might need to pay a higher interest rate. They may get approval for a loan for a low value and strict eligibility criteria or may just face outright rejection.
Your credit score can highly influence the type of loan you obtain. Individuals with a high credit score may be able to acquire prime loans with competitive interest rates and terms. Individuals with a low credit score may be restricted to subprime loans with higher interest rates and less favourable conditions.
How To Boost Your Credit Score?
Regular Credit Report Checkups
Get a copy of the report of your credit score and check it regularly to ensure that the credit score is high and there are no errors or discrepancies. You can sit with your mortgage broker in Brisbane occasionally to assess the report and maintain accuracy.
Pay Your Bills On Time
Your payment history highly contributes to your credit score. Therefore, make sure to pay your bills on time along with your credit card bill and utility bills.
Minimise Credit Card Balance
Maximum credit card balance can significantly affect your credit score. The amount of credit you are using is below 30% compared to the credit limit you have. Make your financial decisions wisely and clear out the credit card debt on time.
Avoid Opening Too Many Accounts
The lender may suspect a risk if you open too many credit accounts in a short period. Ensure to open a few credit accounts and only use the credit card when necessary.
Keep Old Accounts Open
Another factor that significantly contributes to the credit score value is the length of your credit history. Having an old account means having a longer credit history.
To build a higher credit score, follow these measures and discuss with a finance broker in Brisbane about the factors that can affect it.