Technology mingled with the financial world long ago to create credit profiles on all citizens, and like it or not, your credit score is something that financial institutions often refer to, as it gives details of a person’s credit history.
If you are planning on applying for a mortgage anytime soon, then your credit score will have some bearing on this, and your score would typically be a number between 0 – 1,200 and would be graded in the following standards:
- Very Good
- Below Average
The score is calculated based on information contained in your credit report, which would typically include previous loan repayment history, a list of loans taken out, and also any that are outstanding.
As mentioned above, your credit score will have an effect on a mortgage application, as it is a good indicator of how responsible you are with matters of finance, and certain things, such as a bad debt or bankruptcy will remain on record for 5 years.
Minor things like failing to pay a bill would remain on your record for two years, and neither would look good on any mortgage application. There are several websites in which it is possible to discover your credit score, and the service is free.
Does a Poor Score Mean Refusal?
Not necessarily, although it might be that the lender deems the person too much of a risk and rejects the application, or they might lower the loan amount.
In principle, it is better to wait until your score improves before applying for a mortgage, and things can change without the applicant making any changes, if a previous bad debt were to expire.
One important thing to remember is that every mortgage application you make will be recorded, and obviously, a string of rejections isn’t going to impress anyone.
If you would like further reading on the topic, there are informative articles that outline the likelihood of success, and look at ways to improve your score.
Improving your Credit Score
It is possible to raise your credit score, and the best way to go about this is to make contact with an established mortgage broker, as they will have considerable experience in helping people with a poor credit score to secure a home loan.
If you live in NSW, and are looking for some sound advice, contacting a mortgage broker in Sydney would be your best bet, and together, you could improve your score, which will ultimately lead to your application being accepted.
Clearing Bad Debts
This is one way to improve things, as once you have repaid an outstanding debt, it will be removed from your credit record and that will result in a higher score.
The best person to help you to improve your chances is an experienced independent mortgage broker, as he will have an extensive network of lenders, and some are more willing to take a risk than others.
If your credit score could be better, perhaps the best solution is to be patient, and refrain from applying until things are improved, and under the guidance of an experienced broker, you will soon be able to go ahead with the purchase.