For those that have just started their first jobs, finding room in their budget to start building on their credit score seems like an impossible task but it is a vital step to take if you hope to own a home one day.
This doesn't mean you need to feel pressured in getting your credit score perfect in the first year of working - the truth is there is a lot of start-up costs involved in a young professional's life. From car payments to buying your first sofa (that costs more than anyone ever prepared you for), there are a lot of expenses that need to be covered by your entry-level salary.
Building a good credit score does not happen overnight. Certain stages of your life might require you to live off more credit than others – and that’s entirely okay provided you are able to keep up with the minimum repayments on your various sources of debt. Over time, certain debts, such as student and car loans, will be paid off, freeing up some money to lower other debts and improve your credit score.
For those who have reached the stage of being serious about building a good credit score, it is advisable to have three lines of credit; any more and financial institutions might think you’re over-extending yourself; any less and your credit history will be considered too thin.
If you are getting close to the stage where you are almost ready to apply for a home loan, you should keep in mind that most credit checks will take the last six months of credit activity into account and therefore it is advisable that you bring down debts at least six months before approaching any financial institutions.
Lastly, having an active savings account will contribute towards achieving a higher credit score. Once you’ve lowered your debts, you should then start building up a savings account. Not only will this help you achieve a lower interest rate on your home loan, but it might also come in handy to cover the various unexpected costs involved in purchasing your first property, such as transfer duties and registration costs.
You might also think that working through a real estate agent might be too costly - but the opposite is true. A knowledgeable real estate agent can provide insight into what homes with your given search criteria cost and how long it might take to find a home like this, providing you with a rough timeline around which to organise your finances.
How do I apply for a home loan?
Before you apply for a home loan, it is advisable to get pre-qualified to ensure you know how much you can afford and it also shows sellers that you are a serious buyer.
Make sure the application process goes as smoothly as possible make sure you have all the required documentation ready and use the MyProperty Home Loans service where our team of experts will help you apply to different banks to find the best deal for you!
