7 Easy Ways To Build Your Credit Score for New Home Loan


Credit score


For most people, the journey toward buying a new apartment begins and ends at starting their low credit score. This 3-digit number can make or break your dream of buying a home. Your credit score also determines the interest rate at which you will get the home loan. A higher credit score showcases your trustworthiness and vice versa. So, let's discuss a few easy ways to improve your credit score.


Scan Your Credit Reports:

Imagine going to war with your enemy. Wouldn't you extensively research their arsenals and weak sports? Similarly, review your credit reports to determine your strategy. Run your report with a bunch of experts and apply their inputs to boost your credit score for a home loan.


Dispute Inaccuracies:

After scanning and reviewing your credit reports, promptly raise a dispute with the credit bureau if you find any inaccurate information. We would recommend that you document the mistake to solidify your case. Remember, wrong information can risk your chances of buying a new apartment, so never take it lightly.


Clear Delinquent Accounts ASAP:

Payment history has the lion's share of 35% in the credit report. Therefore, if you have any delinquent accounts, pay them off immediately. Interestingly, clearing such accounts before mortgage application makes a world of difference.

Delinquencies may consist of past few dues, charge-offs or collections. Banks and lending agencies prefer responsible borrowers, so try approaching them with a clean slate.


Make Timely Payments:

When processing your loan application, lenders go through your financial behaviour. If your historical information highlights that you have been inconsistent with your payments, then you have been deemed a high-risk borrower.

There's no magic potion or wand to improve your credit score overnight. It's going to be a work in progress. Therefore, make timely payments and gradually reach closer to your dream home.


Say No To New Debt:

Of course, it's common sense. But, very few people know that even loan enquiries can affect credit score. Therefore, it is advisable to stay miles away from new debt.

If you already have a low credit score, applying for a fresh loan will act as a red flag to potential lenders. This highlights a lack of financial stability and irresponsible financial behaviour. If you want to ensure smooth processing of your home loan, maintain good credit.


Reduce Your Debt:

Apart from avoiding new loans, you should start bringing down your existing debts. You need to consider your debt as monthly bills. In addition to timely payments, reducing a major portion of your pending loans can have a positive effect on your financial credibility.


Leave Your Accounts Open:

Surprised? While you may be tempted to pay off your loans and close the accounts, this isn't advisable by experts. When potential lenders go through your home loan application, they check open and closed credit. Higher the open credit, better the credit utilization ratio. Therefore, avoid closing accounts to increase your chances of getting the loan.


Patience is the key

Your credit score isn't going to shoot through the roof overnight. It is going to take a lot of effort and time. As we discussed in this article, devise a strategy or a roadmap to improve your credit rating. Diligently work towards your goal and take small incremental steps towards your new apartment.