Your credit rating is crucial when applying for a mortgage or any type of loan. The better your credit rating, the higher the chance you will qualify for a good rate from your lender. Having an average or below average rating can greatly reduce your choice of lender and have an adverse affect on your rate. Here are some tips to make sure your credit rating is as high as possible.
1. Use Credit cards wisely
Using credit cards responsibly on a regular basis is key to boosting your score. Banks may ask you for 12 months of credit card statements, and being behind on your credit payments will decrease your chances of getting a loan. Instead, use your credit card for small amounts, and keep up with your monthly repayments. This shows that you can reliably pay back the money you borrow.
2. Don’t miss loan repayments
Making all your payments on time is the factor that impacts your credit score the most. When you pay your credit cards or other loans on time, it goes on your file and improves your payment history. On the other hand, if you miss a payment by 30 days or more, it will go on your file and hurt your history. While your credit rating will not shoot up after simply making a few payments on time, consistently making payments on time is a surefire way to slowly improve your score as those on-time payments start to add up.
3. Dispute errors on your credit report
It is possible that the credit bureau made a mistake on your report, such as marking a payment late when you paid on time. If you find inaccurate information on your report, disputing it can go a long way in terms of improving your score.
4. Don’t apply for new credit products
While banks can’t see if you’ve been denied for a loan, applying for many loans and/or credit cards can still be a major red flag for prospective lenders. This is because they can still see the lenders you have applied to for credit in the past. If you have applied for a loan with multiple banks, and don’t currently have a loan with any of them, they may come to their own conclusions about your repayment capacity.
5. Pay off your utility bills
Banks are increasingly looking at utility bills to determine repayment capacity of potential borrowers. Because of this, it’s important to avoid falling behind on your gas, heat, and electric payments. If even one of these accounts is in arrears, you could end up being denied a loan from the bank.