If you’re setting the goal of purchasing a home in the coming year, it might be time to start getting your financials in order ahead of time.
One of the most important and often overlooked steps is to make sure you have a solid credit score. A credit score is a number that represents how you’ve managed debt in the past.
Every time you apply for credit it impacts your credit score, however, when you do things right – like pay your bills on time – it helps lift your rating.
Lenders will automatically decline borrowers who don’t meet their criteria for what they consider to be an acceptable credit score. This is why it’s important to get that side of your money management in order, well before applying for a home loan or even seeking a pre-approval.
Here’s some things you can do.
Get Your Credit Report
In Australia, it’s possible to get a copy of your credit report and assess your rating. It’s free to do and there are a number of agencies that you can get the information through.
Once you have it, you need to check that there are no errors. That might be things like bills that you paid but aren’t reflected accurately in your credit report.
These mistakes will weigh down your credit score and could impact your ability to find a lender.
Make Sure Everything is Paid
If you have any outstanding bills, it’s important to take care of those debts straight away. Lenders can default loans on payments of $150 or more that are more than 60 days overdue.
The sooner you can tidy up anything that you owe, the faster you can start improving your score.
Pay Your Bills Early
The data credit agencies have on you is very detailed and they can tell not just if you pay your bills, but when you typically pay them too.
If you’re always a few days late, this will be reflected in your credit score. When you’re trying to repair your credit, you should get into the habit of paying your bills the moment they are received.
Even if you pay them on the due date, they will normally end up taking a few days to process through the various payment platforms, which means you are effectively still making late payments.
Be Mindful of Debt
Every time you apply for any form of credit, your credit score drops. All those seemingly small purchases that you make using credit can eventually impact you in a negative manner.
The same thing applies when you want to get a home loan. If you apply to multiple lenders and keep getting rejected, it will not reflect favourably on your credit report.
That is why it’s always best to work with a mortgage broker who can assess your credit report and compare the most suitable lenders for your personal situation. Brokers will also look at other options to improve your financial position with processes such as debt consolidation.
If you have a question or would like more information, please contact…
Steve
Mobile 0423 894 864
steve@bettermoneylenders.com.au
Brett
Mobile 0428 156 680
brett@bettermoneylenders.com.au
