Although purchasing your first house is an exciting milestone, having a high credit score is necessary to get a home loan with favourable terms. Lenders use your credit score to determine your creditworthiness; a higher score might make you eligible for better lending possibilities and reduced interest rates.
Here are some essential methods to raise your credit score if you intend to apply for a home buyers loans in Melbourne.
1. Look For Errors In Your Credit Report
To begin, get a free copy of your credit report from the leading credit agencies. Check it for errors, like inaccurate late payments or accounts that aren't yours. To make sure your score represents correct information, dispute any mistakes.
2. Pay Your Bills On Time
The largest factor influencing your credit score is your payment history (35%). Missed or late payments can lower your credit score considerably. To prevent missing deadlines, set up automatic payments or reminders. If you have a history of late payments, concentrate on paying on time and consistently going forward.
3. Lower The Balances On Credit Cards
Your credit score may be lowered by high credit utilisation, which is measured by the ratio of your credit card balances to your credit limits. For maximum effect, try to keep utilisation below 30%, but ideally below 10%. Prior to qualifying for a mortgage, pay off outstanding balances and refrain from maxing out credit cards.
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4. Refrain From Establishing New Credit Accounts
Your score for first home buyers loans in Melbourne may be momentarily lowered by the hard inquiry that is triggered by each new credit application. Another element that affects your score is your average credit age, which is decreased when you create new accounts. Prior to applying for a mortgage, wait to apply for new credit cards or loans.
5. Maintain Open Old Accounts
You can improve utilisation and shorten your credit history by closing old credit cards. Keeping older accounts open, even if you don't use them, contributes to a longer credit history, which raises your credit score.
Your dream of homeownership will become more affordable if you take some proactive measures to improve your credit rating and get a better mortgage offer.
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