A good credit record is your most important asset when buying a house. Here’s how to clear your credit score and ensure you get the thumbs-up from your bank.
- Make sure you maintain a good credit record.
- A good credit record goes a long way to getting bank approval for a bond.
- Manage your debt – don’t take on more than you can afford.
- Pay your bills on time.
A good record of servicing debt is your most important asset when buying a house. This is because it’s the first thing banks look for when considering your bond application and will influence a lender’s decision on whether to approve your application for a home loan.
A credit report is a summary of your financial status as regards expenditure and debt: what you spend your income on, whether you can afford the debt you have, and whether you have faced legal action initiated by a lender for non-payment.
Basically, your credit score is a three-digit number that tells the bank how much of a risk you are.
Tips for improving your credit score
However, a good credit record can’t be achieved overnight. “If you are considering buying a house in the next few years, you should do what you can right away to guarantee you score well,” says Kay Geldenhuys, Head of Sales Fulfilment at O-YES Home Loans – South Africa’s largest home loan comparison service.
Here, Geldenhuys shares her three top tips for ensuring your credit record is squeaky-clean and that you get the thumbs-up when it’s time to make the exciting move from house hunter to homeowner:
Tip 1: Start small
“Ironically, the golden rule of credit is that it’s easier to get it if you’ve already had it,” Geldenhuys explains, adding that this isn’t as impossible as it sounds. “It simply means that you should start small, proving that you’re responsible with credit so that the bank will look favourably on your home loan application when the time comes.
Store credit, cell phone accounts and bank loans – especially for other assets, such as a car – are a good place to begin.”
A credit card also has a strong influence on your credit score, so try to include at least one of these in the mix, she advises. Then be absolutely diligent about making monthly repayments. “Paying back your credit card balance has a significant impact on your score, as it’s not just about having the credit, but how you deal with it that the banks are assessing,” she explains.
Tip 2: Pay your bills
While the timely payment of your credit card or store debt reflects favourably on your credit record, so too does the payment of your bills, says Geldenhuys. “Paying all your bills on time and at the correct monthly instalment, or even a little more, will help you build up a good credit record.”
Tip 3: Get your credit report
“Every South African is entitled to check their credit record, at no cost, once a year,” Geldenhuys says, explaining that this can be done through any registered credit bureau.
While there are steps that can be taken to rehabilitate a bad credit record, the best way to be financially fit is to pay your bills on time and in full. “It’s simple really: to ensure a good credit record, don’t get into more debt than you can afford, and then make sure you pay it all back.
These two crucial habits will prove good practice for repaying your home loan when the time finally arrives,” she says.
Improving your chances of getting a home loan
Improving your credit record is one way to increase your chance of home loan approval. Another is to apply for a home loan with multiple banks.
Some banks have less stringent lending criteria. So even if your application gets rejected at one bank because the credit score is too low, another might be willing to grant it for the same credit score.
O-YES Home Loans can assist in this. We submit your home loan application to multiple banks, allowing you to compare deals and pick the best one.
You can also assess your chances of securing home loan approval with your current credit record by getting prequalified with us, either by using our free, online prequalification tool, the Bond pre-qualifier or by getting one of their experts to prequalify you.
We offer other tools that can make the home buying process easier. Start with our Bond Calculator, then use our Bond Pre-Qualifier to determine what you can afford. Finally, when you’re ready, you can apply for a home loan.
Courtesy of OOBA Home Loans
PLEASE NOTE: Kindly be advised that O-YES Properties will not advise of a change in its banking details by means of electronic communication. Do not rely on any form of electronic communication which may suggest that the banking details provided by O-YES Properties have been altered.