Credit profile, score, rating: If you want to take out a home loan, these are important terms that you need to know more about.
What is a credit score?
All credit-active people have a profile. This is a summary of your history with each loan provider you have ever dealt with, and is a record of how well you have managed your accounts, such as: B. Loan repayments, overdue debts, how often you asked for loans and what types of loans or loans you applied for and the frequency of your applications.
How it works?
Credit information providers summarize your profile in a so-called credit score. The score is between 0 and 1200. The higher the number, the more likely that you can repay a loan. Lenders review your credit profile and score for information about your creditworthiness and credit history, and assess whether you are able to take out a new loan. This information assures lenders that you are good at repaying money to those you have borrowed from – i.e. H. You are a low risk customer.
A good score not only increases the likelihood that you will get approval for your home loan application, it also means that you qualify for a better interest rate. The other side of the coin, of course, is that if your score is poor, you are less likely to qualify for new loans. This protects the lender and those with low scores from taking out additional loans, overwhelming themselves and increasing their debt. In short, you need to have a good credit rating so that your home loan application can be approved.
It is therefore a good idea to find out what your creditworthiness is before applying for a loan and to give yourself time to improve it before you contact a lender.
How to check your score?
A great place to start your research is ASIC’s MoneySmart site. You can get a free credit rating from a number of online providers listed on the MoneySmart website.
How can you improve your score?
Improving your credit rating starts with looking at your current financial situation and ways to improve it. Taking a good credit position before applying for a loan can increase your chances of getting approved.
You can improve your score by:
Lowering your credit card limits
Consolidation of multiple personal loans and / or credit cards
Limit your loan requests
Pay your rent and bills on time
timely payment of your mortgage and other loans
Pay off your credit card in full every month
To avoid surprises, be prepared and know your creditworthiness.