Looking to get a home loan but worried about your low credit score? A credit score is considered by lenders when assessing home loan applications. But don’t stress – it is only one factor, and a poor score doesn’t rule you out of getting a home loan.
Find out how to improve your credit score and get your home loan approved.
What Is A Credit Score?Your credit score is a numerical score that represents how reliable you are. It is drawn from your credit report, which is a record of your credit history – or how much and how often you have borrowed money. The score is calculated on a five-point scale that lenders use to measure risk, resulting in a number between zero and 1200. A higher score means you are less risky, while a low score makes it more difficult to get a loan.
How Do I Check My Credit Score?It’s easy to check your credit score. Online credit store providers can deliver your credit score to you in minutes – you just need to provide them with some information. It’s a good idea to check your credit score regularly so you know where you stand. Checking your credit score is free and you should never be asked to pay for the service.
How Does My Credit Score Affect My Home Loan Application?Lenders will use your credit score when determining whether or not to give you a home loan. When you have a low credit score, it can make lenders more reluctant to accept you, and you are seen as a risky borrower.
Your credit score isn’t the only factor that lenders consider when assessing you for a home loan. Other factors they will look at include your current financial situation, such as your income, savings, and spending habits. They will consider any assets that you own, such as shares or investment properties. Additionally, they will take into account whether you are the sole borrower or if you’re applying with a partner. If you have a poor credit score but your partner has a high one, yours might not be an issue.
A low credit score doesn’t mean you can’t get a mortgage. Although some lenders will decide you are too risky, others will be happy to work with you. The size of the deposit that you have saved up also makes a difference – if you have a large deposit, this is a good sign from the lender’s point of view.
How Can I Fix Mistakes On My Credit Report?If you have a low credit score and you’re not sure why, it might be worth carefully checking your credit report for any errors. Mistakes do happen and sometimes you may have a loan or debt listed that isn’t yours. If there is an error on your report, you can contact the credit reporting agency and ask them to fix it for no fee.
How Can I Improve My Credit Score?Although you can fix mistakes on your credit report, you can’t remove negative information. Never agree to pay anyone to ‘scrub’ your credit report – it simply isn’t possible.
However, you can improve your credit score. Good financial management helps to get your affairs in order, allowing you to consolidate debts and avoid being late to pay any bills. Put together a budget and stick to it for a better credit score in the long run.