When you take your first tentative steps towards owning your own home it can feel a little daunting. It’s not just the responsibility that home ownership brings but also where to even start with the mortgage minefield. Different deals, interest rates and repayment terms can all seem a little too much, particularly if you are worried about your credit score.
Image from firstoptiononline.com
Your credit score is the start of your homeownership dreams. An unhealthy score could mean you don’t get the best deal on your mortgage or worse, are unable to get a home loan at all. If you are worried about your credit score then read on for advice on how to get approved for a home loan by improving your credit health.
- Be prepared – the first step to good credit health is to know what your credit score is and how it is figured out. You can get your credit score from companies like Equifax and Experian free once every 12 months. Or you could use a service like WisePiggy and access your free credit score every month to see it improve as you take positive steps towards your new home. Once you have your score you need to understand how it is made up. Normally it is a mix of outstanding debt, open lines of credit, payment history and financial links and responsibilities. Understanding your credit score gives you the power to fix it.
- Fix errors – once you understand your score you can set about fixing any errors on it. Perhaps some of your details are incorrect or not up to date? You might be linked financially to someone who is no longer part of your life. If anything is missing or not up to date now is the time to fix it so you can see what you are really dealing with.
- Deal with debts – the next step is obvious; it’s time to start dealing with any outstanding debt. If you have debt on credit cards, loans or other outstanding bills call the companies that deal with them and arrange suitable repayment terms that you can stick to and that will help you move towards a more debt free life. By dealing with the debt and taking action to repay them you will soon see the impact on your credit score.
- Pay bills on time – bills are inevitable but they are also a great way of demonstrating you are reliable with money and can make repayments on time. Get on top of your bills by using direct debits and never overspending. Don’t be tempted to max out credit cards as this will make it more difficult to pay your bills in total and on time. Live within your means and you will soon have the home of your dreams.
- Don’t close accounts – once you have paid off lines of credit don’t close them to avoid temptation. Having open lines of credit proves that you can be responsible with money and live within your means. That is what home loan companies want to see when they are making a decision about your lending application.
Image from Property New India