Your credit score is one of the most critical factors lenders consider when determining your eligibility for a mortgage. Whether you are a first-time homebuyer or looking to refinance, having a good credit score can help you secure better interest rates on your loan and terms.
Here are five steps you can take to improve your credit ratings and improve your options for getting the mortgage you want.
Review Your Credit Report Regularly
Start by checking your credit report to ensure the information is accurate. You can request credit reports from Equifax and TransUnion, the two main credit bureaus. Look for any errors such as incorrect personal information, outdated accounts, or signs of fraudulent activity.
If you spot inaccuracies, dispute them immediately. Correcting these mistakes can give your score a quick boost, ensuring that it accurately reflects your creditworthiness.
Pay Your Bills on Time
Your bill payment record is the most significant factor influencing your credit score, accounting for about 35% of it. Late payments or missed bill payments can lower the score, even if they occur infrequently.
You can set up automatic payments for all your bills or mark important due dates in your calendar. Whether it’s a credit card, utility bill, or loan payment, consistent on-time payments will gradually improve your credit score.
Keep Your Credit Utilization Low
Your credit utilization ratio has a big role in your credit score status. Ideally, aim to keep your credit utilization below 30%. Lowering your credit utilization is a simple yet effective way to boost your score over time.
Avoid Opening Too Many New Credit Accounts
Every time you apply for new credit, it results in a “hard inquiry” on your credit report, which can temporarily lower your score. While it’s okay to apply for new credit occasionally, too many inquiries in a short period can make you seem risky to lenders.
If you are planning a large purchase like a home, try to avoid applying for other types of credit. Instead, focus on managing your existing credit responsibly to show lenders that you’re a reliable borrower.
Maintain a Diverse Credit Mix
A well-rounded credit profile can positively impact your score. This means having a mix of credit accounts, such as credit cards, instalment loans (like car loans), and retail accounts. However, don’t take on new debt just to diversify your credit mix. The key is to manage the accounts you have responsibly, maintaining a good payment history across all.
Why Your Credit Score Matters for Mortgages
The credit score of a borrower directly influences the mortgage interest rate you’re offered. A higher score helps you get lower mortgage interest rates, saving over the life of your loan. On the flip side, a low credit score might result in higher rates or even difficulty getting approved for a mortgage.
At AKAL Mortgages, we understand that improving your credit score can feel overwhelming. That’s why we’re here to help. Whether you’re in the market for a new mortgage, a refinance, or need advice on improving your financial standing, our team of experienced brokers can guide you through every step of the process.
Need Mortgage Solutions? Contact AKAL Mortgages
Improving your credit score is one of the best steps you can take toward homeownership, but it’s not the only factor. At AKAL Mortgages, we offer personalized mortgage solutions tailored to your unique financial situation. Whether you need a traditional mortgage, a second mortgage, or refinancing, our experts are here to help you secure the best deal.
Contact AKAL Mortgages for more information or reach out to one of our experienced brokers today to discuss your mortgage options.