How Credit Score Influences your Home Loan Application
One of the most frequently asked questions from prospective Bardale Village homeowners is what role does credit score play when securing a home loan.
Considering that banks require a clean credit record before they’ll consider approving your loan application, getting your financial affairs in order as quickly and efficiently as possible is an extremely important part of achieving homeowner success.
Understanding your credit profile and how your credit score is determined is crucial when applying for a home loan. In terms of the National Credit Act (NCA) you are entitled to one free credit report each year. Once you’ve identified any problem areas on your credit report, necessary steps can be taken to rectify them.
Let’s delve into what a credit profile entails, how to deal with debt and ways to keep your credit score healthy.
What is a Credit Profile?
Every credit-active South African has a credit profile. Your credit profile contains a history of every dealing that you’ve had with a credit provider. This information is sent by the credit providers to the Credit Bureaus.
Your credit profile is used by the Credit Bureaus to draw up your credit report.
Credit reports are used by your current credit providers to assess whether they should approve your loan or allow you to purchase items on credit.
What is your Credit Report used for?
A credit report is seen as your financial report card. This report reflects your financial health by taking into account the things that you spend your income on, whether you’re in a position to afford the debts that you already have and whether any lender has taken legal action against you for outstanding debts.
Your credit report is used by credit providers to assess a number of aspects. These include your credit history, your debt repayment behaviour as well as your current level of indebtedness.
Most credit reports will summarise your credit profile information to provide you (and your credit providers) with a credit score.
Dealing with Debt
If you are ready to enter the property market and want to strengthen your credit score, it’s important to ensure that all accounts are 100% up to date and that you have been successfully paying them for 3 to 6 months.
There are a number of debt counselling services available that can be used to assist you in consolidating your debt into a single, longer-term loan, making it easier for you to successfully afford your monthly repayments.
In cases where an immediate credit record update is necessary, such as if you wish to make an offer on a home, a credit rehabilitation provider can be contacted to take the necessary legal steps required.
If you have multiple accounts in arrears, the National Debt Mediation Association (NDMA), a non-profit organisation, can assist you in negotiating with your creditors.
Keeping your Credit Score Healthy
While it’s always easier said than done, the following considerations are important for keeping your credit score healthy:
- Don’t max out your credit cards.
- Avoid nearing your maximum credit limit.
- Limit extent of your credit dependency – too much credit can negatively impact your profile.
- Ensure that you always pay the required amount within the defined period.
- Don’t skip payments – paying double the following month will negatively affect your profile.
- Use your one free credit check each year – doing this through one of the Credit Bureaus allows you to check for errors and get them corrected.
Identify Affordability with Bardale Village Calculator
The Bardale Village affordability calculator is available to allow you to identify the bond amount that you could potentially apply for.
Other useful property calculators are provided to assist you with your financial planning and budgeting.
Be financially wise – discover our homes in Blue Downs.
Contact Bardale Village for more information.