How important is your credit score?

Announcement posted by Connect Marketing Systems 24 Jan 2018

'Credit profile’, ‘credit score, ‘credit assessment’: if you’re thinking of taking out a home loan, these are important terms you’ll need to learn more about.

What is a credit score?

All credit active people have a credit profile. This is a summary of your history with every credit provider you’ve ever dealt with, and serves as a record of how well you’ve managed your credit accounts like loan repayments, overdue debts, how often you’ve asked for credit and the kinds of loans or credit you’ve applied for, and the frequency of your credit applications.

Credit reporting providers summarise your credit profile into something called a credit score. The score is between 0 and 1200, where the higher the number, the more likely you are to be able to repay a loan. Lenders look at your credit profile and credit score to find out about your credit history and behavior, and assess if you are able to take on a new loan. This information reassures lenders that you’re good at paying money back to those you’ve borrowed from – i.e. you are a ‘low risk’ client.

A good credit score not only makes you more likely to get approval on your home loan application – but it also means you’ll qualify for a better interest rate. Of course, the other side of the coin is that if you have a poor credit score, you will be less likely to qualify for any new loans. This protects those with low credit scores from taking out additional loans and overextending themselves and getting into more debt.

In short, you’ll need to have a good credit score rating for your home loan application to be approved. It’s therefore a good idea to first find out what your credit score is before applying for a loan, and to give yourself time to improve it before approaching a lender.

How to check your credit score

A great place to start your credit score research is ASICs MoneySmart site. You can get a free credit score from a number of online providers, which are listed on the MoneySmart site.

To avoid any credit surprises, be prepared and know your credit score.

I can assist by reviewing your credit history and help you to establish a plan to improve your financial history. If you need any assistance in this matter please don’t hesitate to call us on 02 9653 9333, email: scottpartridge@mortgagechoice.com.au