Banks usually keep the criteria needed to get a home loan approval a secret, but that does not mean that homeowners’ chances of increasing their chances of success are totally hopeless.
Credit ratings, amongst other factors, are well-known in playing a huge part in the acceptance or rejection of a loan from the bank. Many people struggle to achieve a spotless credit rating, but it is actually not that difficult if you follow these few clever tips.
There are two sides to the bank’s decision when it comes to granting a mortgage; It is definitely not just a mere yes or no question:
- The first is the risk to the applicant. Can the applicant actually afford the mortgage?
- The second is the risk to the bank. How reliable is this client? Can they be trusted with such a loan and the repayment thereof? Your credit rating can be a vital component when it comes to satisfying the latter.
There are many ways in which you can ensure that your credit rating is top notch, but experts warn that minor discretions can come back to haunt you later down the line.
Banks consider a two-year period when it comes to checking your credit rating, which means that you will have to have a clean record for about two years.
Here are the top five tips that can help you clean up your credit:
#1 – Build a credit record (if you don’t already have one)
Not having a credit rating can be almost as bad as having a poor rating because banks prefer approving applicants with a proven record of responsible debt management.
Furthermore, not having a credit record won’t necessarily disqualify you from being approved for a home loan, but a healthy record is guaranteed to work in your favor!
Having said this, if you do not have a credit record, it is not advisable to go out into every store and get a bunch of credit cards and accounts for things that you don’t need. It might not be a bad idea to get one credit card that you can use for everyday things like groceries and toiletries.
Just remember to put the money that you spend back into the credit card account so as to avoid debt piling up as you buy.
#2 – Pay on time
Another important factor is how punctual you are with your payments. It is always a good idea to pay your accounts on time.
Slow payments, even if it is just day late, can reflect negatively on your credit rating. Avoid any risk of losing your bond approval and pay your accounts on the exact day that it’s due.
#3 – Never let a debit order bounce
Most bond payments are done via debit order so it is understandable that banks have a dim view of applicants who have a poor history.
A single bounced debit order can cost you points on your application, so ensure that you have enough money in your account to cover automatic payment!
#4 – Have your salary paid into your bank account
Having your salary paid into your bank account doesn’t only mean that you are covered when debit orders are deducted, but it also means that your account establishes your income.
It helps banks get an overview of your income versus your expenses.
#5 – Avoid bank overdrafts
Overdrafts are a courtesy provided by banks for if you are short at the end of the month, but it is not something that they like doing.
Any history of overdraft is a black mark on your credit rating so avoid it as much as possible.
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