Credit profile, score, assessment: If you are thinking about a home construction loan, these are important terms that you should inform yourself about.
What is a credit score?
All credit active persons have a profile. This is a summary of your history with each lender you have ever dealt with and serves as a record of how well you have managed your accounts e.g. B. Loan repayments, past due debt, how often you have asked for credit and what type of loan or credit you have applied for and the frequency of your applications.
How it works?
Credit report providers summarize your profile in what is called a credit score. The score ranges from 0 to 1200, with the higher the number, the more likely it is that you can repay a loan. Lenders look at your credit profile and score to learn more about your credit history and behavior, and to assess your ability to take out new credit. This information reassures lenders that you are good at paying back money to those you borrowed from – i.e. you are a “low risk” customer.
A good score not only increases the likelihood that your loan application will be approved, but also means you qualify for a better interest rate. The other side of the coin, of course, is that if you get a bad score, you’re less likely to qualify for new loans. This protects the lender and those with low scores from borrowing more and becoming overextended and incurring more debt. In short, you must have good credit for your home loan application to be approved.
It is therefore a good idea to first research your creditworthiness before applying for a loan and take the time to improve it before approaching a lender.
How to check your score?
A great place to start your research is ASIC’s MoneySmart website. You can get a free credit check from a number of online providers listed on the MoneySmart site.
How can you improve your score?
Improving your credit starts with looking at your current financial situation and ways to improve it. Putting yourself in a good credit position before applying for a loan can help increase the likelihood of approval.
You can improve your score by:
Lower your credit card limits
Consolidation of multiple personal loans and/or credit cards
Limit Your Credit Requests
Pay rent and bills on time
pay your mortgage and other loans on time
Pay off your credit card in full every month
To avoid surprises, be prepared and know your credit score.