Improve your credit score
Improve your credit score
Buying your first property requires preparation years in advance. From accumulating savings month after month for your 20% deposit to ensuring the bank likes you enough to help you buy your dream home.
But how do you get the bank to like you ?
By getting a good credit score! A credit score is a simple 3 digit number which allows institutions such as banks to understand how good you are with your money.
Your credit score is calculated with the following criteria:
- Payment history (35%)
- Amount owed (30%)
- Length of credit history (15%)
- New credit (10%)
- Type of credit used (10%)
A lower score means you’re KAK! A higher score means you’re KIFF!
- 800+ – Outstanding
- 740 – 799 – Perfect
- 670 – 739 – Very Good
- 580 – 669 – Average/ Good
- 579 & below – Poor
A higher score will make your life a whole lot easier when it comes to applying or credit. So here are some crucial steps you can take to ensure the bank deems you credit worthy when it comes to granting you that juicy bond:
Find out what your score is.
First step is to know where you stand. From there you can determine what the right action will be.
Remove Any errors on your credit report
Yes there can be errors on your credit report! Common examples of these are:
· Incorrect personal info
· Closed accounts being shown to still be open
· Accounts which do not belong to you
· Duplicate accounts
· Incorrect payment history
Make sure you notify the credit bureau of these mistakes either online or by phone, the report should come with instruction on how to reach the bureau.
Pay on Time
Payment history makes up 35% of your credit score. That is a big chuck! Therefore its paramount that you make sure you pay your bills on time every time.
Improve your spending habits
Try not to max out your credit cards or overdrafts. This could be an indicator of bad spending habits as well as leave you with less credit in times of emergency.
Stabilise your life
Chopping and changing jobs or addresses are both warning signs to lenders.
Stay out of court
Being summoned to court could affect your ability to work as well as bring added expenses which rightly so is an added risk to lenders.
Close unused accounts
If you have credit cards or overdrafts which you do not use, close them. Just close them… it helps.
Apply for credit only when you need to
Every time you apply for credit your credit score gets punched in the face. You could even drop 10% on your credit rating each time you apply.
You need to have a credit history to show lenders that you know how to handle debt. Saving is great but that doesn’t impress any lenders. A great way to start is to get a low fee credit card, use it rarely and pay off your debt on time. Length of credit history accounts for 15% of your credit score.
If you have a partner…
If you are planning on purchasing a home with a partner make sure they are also diligently keeping a healthy credit score.
You can improve your credit rating significantly in 6 months if you try hard enough. But it can be a long road to purchasing your first property, so start as soon as you can to create a long healthy credit history to give yourself the greatest chance to be approved for your home loan.