How do I put myself in a better financial position before applying for my mortgage?
Before getting started on improving your credit score, you need to understand what it currently is. There are several ways you can check this, and the Mortgage Brokers at Allen Finance in Bunbury, Western Australia can help you understand this.
What is a credit score?
A credit score is a number (between 0-1200) used by banks and lenders which represents the likelihood of them being able to make repayments on what they borrow. Your credit score is calculated through a mix of your credit report (which includes debt, the length of your credit history, and your payment history), the percentage of the available credit you are using, how often you apply for new accounts and the types of credit you have.
For example, most people do not realise that buy-now-pay-later options like AfterPay and ZipPay are a form of credit taken into consideration when calculating your credit score. Late repayments on these lines of credit and how much you owe can reflect on your score.
How do I improve my credit score?
There are a number of very achievable ways to improve your credit score to put you in a better position with banks and lenders when it comes to your mortgage:
Paying your bills in a timely manner
Check that you don’t have any errors on your credit file
Paying off your debts as soon as possible
Close credit you don’t need or even reduce the limits to reduce the amount of debt available to you%
Ensure that all payments on loans and credit facilities are all paid on time
Don’t apply for multiple loan applications as this can have a negative effect on your credit score even if you don’t go ahead or are just shopping around.
In Australia, there are different brackets for the differences in credit scores:
0–549: Poor
550–649: Fair
650–749: Good
750–849: Very good
850–1,200: Excellent
Want to find out more about your current credit score and how to improve it? Contact Allen Finance Mortgage Brokers to set up an appointment.
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