Credit score must-knows: How to get your home loan approved
An excellent credit score is one of the most priceless assets a potential home buyer can have. This tool has the power to secure favourable mortgage and refinancing rate, influencing everything from the size of the loan repayment to the interest rate on the home loan.
“It is advisable that potential home buyers check their credit score before even starting to look for homes or applying for a home loan, as the banks will look into your financial history and the application will be declined if you have a low credit score. The important thing is that your accounts are up to date and that you have the ability to afford the bond,” says Craig Hutchison, CEO Southern Africa.
“South Africans are entitled to a free copy of their credit record every year. Many South Africans are surprisingly unaware of the importance of a good credit profile, many do not know what a credit profile even is, and even if they do, they seldom check their own personal credit profile,” says Mellony Ramalho, Group Executive African Bank.
“Today many potential employers look at credit profile reports as a way to judge a person's character and level of responsibility.”
Your credit score is typically a number from 0 to 999, and is calculated by using all the details on your credit profile.
“It reflects a 'score' summary of all your financial decisions, and is often used by lenders, such as home loan and personal loan companies, to make accurate decisions on whether they should lend to you or not,” says Michael Bowren, CEO and founder Fincheck.
Overall, a credit score measures the amount of potential risk the consumer is to the creditor.
We take a look at what the experts have to say about credit scores, and what should and shouldn’t be done:
How does a credit score work?
The higher your score, the better your credit health will be, which will be an advantage when applying for a home loan, making it easier for you to borrow money at lower interest rates.
“The lower the score, the higher the risk which then influences the outcome of the credit application” says Andile Fulane, CEO, Seed of Prosperity.
By managing your credit profile effectively, you can ensure your image and profile is viewed favourably by lenders or other organisations. A bad credit score would mean the exact opposite of this, and result in almost no financial institution willing to offer you a home loan.