Buying a new home is an exciting and emotional decision - but it should also be an informed decision, says Carl Coetzee, CEO of BetterBond. “With record-low interest rates, affordability levels have increased and more aspirant buyers can now afford to apply for a bond for their dream home. Having a good credit score is one of the most important things that banks look at when considering home loan affordability.”
There are a few simple rules that will ensure your credit rating is in good shape before you apply for a bond.
Build gradually
The best way to have a good credit record is to build it up over time, says Coetzee. “In this case, having debt can be a good thing - provided you manage it well. This means having clothing or other retail store accounts, cell phone bills, car payments or personal loans. If you have been careful about paying on time and covering at least the minimum amount every month, these accounts will contribute positively to your credit rating.”
A credit card can be a force for good in your bond application if you use it with care and make sure you maintain regular monthly payments. In this instance, it is not only about having the credit, but how you manage the credit that tells the bank a lot about you and gives them an indication of how you could one day manage a home loan.
Pay on time
Minor arrears can have a major impact on your credit rating and therefore your bond application. “Do not underestimate the influence of this small little detail on your eligibility for a home loan,” says Coetzee. The banks are cautious about lending to someone who has even the slightest arrears to their name when it comes to paying their monthly dues.
“Do not let this trip you up. Always pay your accounts and meet your financial commitments in full and on time, then you will have nothing to worry about when the time comes to apply for a home loan.”
Know your score
You can view your credit score and access your credit report free of charge online via various credit bureaus. They allow you to obtain a detailed breakdown of past and present accounts, use the dispute function to query or clarify your information, and get advice to help you improve your credit score and raise your credit rating if it needs a bit of work.
“Remember that a good credit score is important for your overall financial well-being. It is always a good idea to keep an eye on it, and to maintain it to the best of your ability. Then, when the time comes, you will be in a position to get the best bond to buy your dream home,” says Coetzee.
Talk to the experts
Using a bond origination service can help you with your home loan affordability. They review your income and expenses to make sure you can afford all the costs that come with owning a home. They can also pre-approve you for a home loan so you know exactly what you can afford to spend,” says Coetzee. “Make the most of the current low interest rates, but do so wisely by being honest with yourself about what you can afford and by knowing your credit score.”
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