Have you ever wondered how lenders decide whether to grant you that coveted home loan? Your credit report holds significant importance in their decision-making process—a sort of financial report card showcasing your payment habits and borrowing history.
The introduction of the Comprehensive Credit Reporting (CCR) rule in 2019 has made your credit report even more crucial. In this article, we’ll delve into what you need to know about credit reports and why your credit score plays a vital role in your journey towards homeownership. Let’s dive in!
What is a credit report and why is it important?
A credit report summarises your credit behaviour and financial profile, compiled by credit bureaus. It includes details such as your credit score, credit products, repayment history, personal information, defaults, credit applications, bankruptcy records, and credit report requests.
Lenders use this report to assess your creditworthiness based on factors like credit applications, debt, repayment history, and bankruptcies. A higher credit score indicates to the lender that you are a less risky borrower, improving your chances of loan approval and potentially securing a better interest rate.
Since inaccuracies can sometimes be present in a credit report, it's crucial to check yours regularly.
If you wish to access your credit report, please get in touch.
Can you get a mortgage with bad credit?
Obtaining a mortgage with bad credit is not impossible. Here are steps you can take:
Verify your credit history: Ensure the accuracy of your credit score by checking for errors or signs of fraud. If you find any inaccuracies, contact the credit reporting agency for a correction—a free service.
Consult a mortgage broker: Mortgage brokers can help explore loan options tailored to your needs and guide you through the application process.
Approach a specialist lender: Some lenders specialize in 'bad credit' home loans, considering personal circumstances that may have affected your ability to repay in the past. A mortgage broker can help you find a suitable specialist lender.
While bad credit home loans may come with less favourable terms due to higher risk for lenders, you can improve your credit score to access more competitive loan options.
Tips to improve your credit score
To secure a favourable home loan, improving your credit score is crucial. Follow these key tips:
Manage credit card balances: Keep balances low and within the credit limit. Pay off balances in full or more than the minimum payment.
Use credit responsibly: Avoid maxing out cards, make timely payments, and don’t take on excessive debt.
Limit new credit applications: Apply only when necessary to avoid numerous hard inquiries.
Review your credit report: Regularly review for changes or errors, promptly reporting discrepancies. Seek assistance from financial counselors for guidance and support in managing finances.
Pay your utility bills on time: Timely payments showcase responsibility and avoid late fees.
By following these tips and maintaining responsible credit management, you’ll improve your credit score and enhance your chances of securing a first home loan.
Your next steps?
If you’re considering a home loan but need to improve your credit, give me a call. We can work with you to find finance suited to your needs.
To talk through your options, get in touch today. We’re here to support you and ready to address any inquiries you may have.