The importance of your credit rating when applying for home loans

By the resi financial blog team, 03 October 2013

Understanding your credit rating

As everyone knows, there are a multitude of factors that contribute to an individual's success when it comes to securing a home loan.

Regardless of whether you're a first home buyer or a seasoned investor, there are a number of different criteria that need to be fulfilled before a lender could be willing to give you a mortgage.

For example, something that factors quite heavily into your home loan is your credit rating. When it comes to lenders giving out home loans, it's important to remember that the basic premise of borrowing comes down to whether or not the lender is confident you can repay the loan.

There are various documents that a lender will ask to see before they make their decision. These documents will determine your credit rating. The lower your rating the riskier it is for the lender to give you a loan.

The interest rate of your loan is also affected by your credit rating. Generally, the higher your credit rating, the lower your interest rate. It is therefore important to maintain a good credit rating throughout your life in order to keep all of your options open heading into the future.

If you're applying for a home loan and need to boost your credit rating, take a look at your finances from the last 12 months. Assessing your situation can give you clarity and vision, helping you to overhaul your spending habits and get back on track.

Making credit card and personal loan repayments on time is the best way to help begin boosting your credit rating back up.

On the flip side, if you have no credit rating, now could be the perfect time to take out a credit card and begin to use it wisely. Making small purchases every month and paying them off on time will aid your credit growth and get you in the prime home loan application position in no time.

Categories: Home Loans, Personal Finance