Buying a dream home is one of the most important milestones in our lives. There are so many factors to consider for, such as the affordability, amenities and location, before you even find a real estate agent or mortgage lender. However, after a long process of finding your ideal unit and finally getting ready to apply for a home loan, you discover something terrible: your credit score needs some work.
Don’t let this happen to you!
Credit score is a major consideration used by banks and lenders to determine if they would approve one’s mortgage application. A good credit score relates to a low credit risk. Hence if your credit score is poor, it will make it harder for you to obtain home loan, impeding your home purchase process.
Take the effort to build a good credit or improve your credit score with the following simple ways and you will be well on your way to owning your dream home.
Know Your Credit
The very first step to building a good credit is to check your credit score and know where your credit rating currently stands. At present, you can check your credit score by obtaining a credit report from Credit Bureau Singapore (CBS) at $6.42 per copy.
You can also obtain a complimentary credit report if you make a credit application with CBS members.
The credit report will display your credit payment history record compiled from banks and financial institutions, along with your credit score. CBS credit score is a four digit number ranging from 1000 to 2000 derived from your past payment history on your loan accounts. The higher the score is, the lower the probability of defaulting on a repayment within the next 12 months.
There are many factors which can affect one’s credit score. Know where your credit rating currently stands and identify your shortfalls, if any, so that you can work towards building a good credit score effectively.
Keep Your Credit Active
You need to use your credit accounts to build your credit. If you are thinking of not using your credit card at all in the hope of keeping your credit record squeaky clean and scoring that perfect credit score, then I am afraid to say no, it does not work that way. There needs to be sufficient credit activity in your credit file in order to have a credit score.
Keep your credit active and accumulate a long history of good credit behaviour. Swipe your card, but in moderation. Pay your bills on time and in full. Over time, the good payment record will help you build up your credit file and propel you to the good credit score.
Keep Your Credit Utilization Low
Though using of credit accounts can help you build credit, they can also affect it when you accumulate too much debt. Lenders like to see plenty of breathing room between the amount of debt reflected on your credit cards and your total credit limits. The wider the gap, the better your credit worthiness. Hence the next time when you are thinking of taking advantage of your credit limit and only make the minimum payment for your card, think twice again. Not only will your rollover balance be slapped with high interest charges, it may also affect your credit score.
Keep your credit utilization low. Cut down on the trip to the movie or weekend getaway and save the money to pay off your outstanding balance instead. Not only will it save you from paying a high interests in the long run, it will also earn you a good credit score.
Don’t apply for multiple credit at once
With the attractive signup perks of new credit card offers surrounding us these days, it is hard not to be drawn in by the attractive offers. While it is good to be able to enjoy these signup perks, it is important to resist the urge to sign up for too many cards at once.
Each time you apply for a new credit facility, the potential lender pulls your credit report in response to your application and an enquiry is placed on your file. Having too many new credit application enquiries on your credit file indicates that you are credit hungry and may possibly affect your credit score.
Space out your credit card applications. If you wish to apply for a loan, work out how much you need carefully and try to take it up in a single loan instead of making separate small loan applications.
Building a good credit is not hard to do at all. Don’t let bad credit keep you from getting a mortgage. Practice responsible borrowing and be consistent, and you would soon be on your way to a good credit for your dream home.
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