2 min read
2 min read
Purchasing your first home is likely to be one of the most important, yet daunting financial decisions you’ll ever make but it can also be the most exciting and rewarding achievement.
Before you start attending open houses, and planning kitchen renovations, you’ll need a healthy credit history as this will give lenders confidence in your ability to repay your home loan. Understanding your credit score and actively managing it can significantly impact your ability to secure a home loan with favourable terms. Here’s everything you need to know to better understand your credit score.
A credit score is more than just a number. It’s a reflection of your financial behaviour and, in many ways, a key that unlocks the door to financial opportunities. When you apply for a home loan, one of the biggest lines of credit you’ll likely ever need, your credit score becomes incredibly important.
Banks use credit scores to assess the risk of lending you money for your home loan. It’s a reflection of your financial history and behaviour, helping them determine whether you’re likely to pay back the loan on time. A higher credit score means lower interest rates, better loan offerings and more favourable terms.
In the world of credit, the general rule is the higher the better. Credit bureaus usually rate credit scores between 300 and 850. A low score is typically considered to be between 300 and 579, while a fair score falls between 580 and 669. However, a good score is anything above 700. So, the higher your score, the better your chances of securing a home loan with favourable terms.
To ensure you’re on the right track, consider obtaining a pre-approval. This will not only reveal what you could qualify for in terms of a home loan, but it also provides insights into areas where you can improve your credit score if needed. By taking proactive measures to boost your creditworthiness, you can approach the homebuying process with confidence, knowing you’re well-prepared to secure the home of your dreams on favourable terms.
Read here to find out how you can improve your credit score.
