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Credit Profile, Score, Appraisal: If you are thinking of taking a home loan, these are important terms that you would need to know more about.
What is a Credit Score?
All credit active people have a profile. It is a summary of your history with each credit provider you have ever transacted with, and serves as a record of how well you have managed your accounts such as loan repayments, overdue loans , the number of times you have asked for credit and the types of loans or credits you have applied for and the frequency of your applications.
how it works?
Credit reporting providers summarize your profile into something called a credit score. The score ranges between 0 and 1200, where the higher the number, the more likely you are to repay the loan. Lenders look at your credit profile and score to get an idea of your credit history and behavior and assess whether you qualify for a new loan. This information reassures lenders that you are good at paying back money to people you have borrowed from – ie you are a ‘low risk’ customer.
A good score not only makes you more likely to get approved on your home loan application – but it also means you’ll be eligible for a better interest rate. Of course, the flip side of the coin is that if you have a bad score, you’ll be less likely to qualify for any new loans. This saves the lender and people with low scores from taking out additional loans and finding themselves spending more and getting into more debt. In short, you need a good credit score rating to get your home loan application approved.
That’s why it’s a good idea to find out what your credit score is before applying for a loan, and give yourself time to improve it before approaching the lender.
how to check your score,
ASIC’s MoneySmart site is a great place to start your research. You can get a free credit score assessment from many of the online providers listed on the MoneySmart site.
How to improve your score?
Improving your credit score begins with looking at your current financial situation and ways to improve it. Having a good credit standing before applying for a loan can increase your chances of getting approved.
You can improve your score by:
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reducing your credit card limit
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Consolidating multiple personal loans and/or credit cards
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Limiting Your Credit Inquiries
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paying your rent and bills on time
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Paying off your mortgage and other loans on time
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Paying off your credit card in full every month
Be prepared and know your credit score to avoid any surprises.
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