Credit Card Debt

Some people believe it is unfair or inaccurate for financial institutions to base their decisions according to their credit score. A credit score is data compiled and stored by credit agencies, which banks and lenders use to determine whether or not to give the best home loans in Sydney.

Fortunately, you have some control over your credit score. Comprehensive Credit Reporting means that banks take bill payments and your behaviour with credit cards or loans into account. Make sure you have healthy available credit without owing large amounts to other creditors.

Although everyone has their ideas about the factors affecting it, there are some common ones. Here are a few things that can add to or detract from your credit score.

Abusing Your Credit Card

One of the most significant considerations for your credit score is debt-to-credit ratios. Total credit limits are divided by the sum of your debt. For example, if you have $5,000 in credit and $1,000 in debt, your debt-to-credit ratio is 20 per cent.

A low debt-to-credit ratio shines a good light on you because it shows you can manage your credit responsibly. A high debt-to-credit percentage (above 30 per cent) might raise alarms; lenders may assume you can’t control your credit well.

Solution: Don’t use more than 30 per cent of your available credit. It helps to track how you spend your money to plan your budget.

Getting Credit within a Short Period

Scattering your credit card applications will destroy your credit score and hurt your chances when looking for the best home loans. That’s because each new application is recorded on your credit report. 

Filling out too many in a short period signals to lenders that you are in a precarious financial position or desperate for credit.  If banks had second thoughts doing business with you before, they would want to distance themselves further from you now.

Solution: Before you apply for a new credit card or personal loan, make sure you compare your options to find the right card or loan for you. You should only use it for the one you want and qualify for.

No Active Credit Lines

This is a bit of a catch-22. If you have never borrowed money before, you likely have a blank slate of credit history and, therefore, a low credit score. If your credit score is down, you can’t take out loans for big purchases, such as cars or homes.

On the other hand, if you have used credit cards and regularly pay off the balance each month, you likely have an excellent credit history and a strong credit score. When banks check your credit report to see how responsible you are at repaying debt, they look for a long history of responsible behaviour while using credit. 

But if they don’t see this, they may turn you down for a loan in the future. These data are essential proofs for lenders to know you are viable for the best home loans out there.

Solution: When you start applying for credit cards, make sure you pick the right one. Choose a card with a low annual percentage rate (APR) and a low credit limit so that you won’t go overboard with your spending. Then, set up automatic payments to keep you from paying off your balance in full each month.

Keep Your Credit Health in the Green for the Best Home Loans

Improving your credit score is a bit of a balancing act. On one hand, you want to maintain a high credit score to make it easier to get the loan, credit card, or perks you want. On the other, you wish to avoid falling prey to the kind of risky behaviours that can sink your score. Being proactive is the key to a great credit score. You can have the best credit in the world when you take the time to make good choices and avoid these pitfalls.

With a good credit score, you can access the best home loans in Sydney available on Wealthy You! We are an Australian mortgage company servicing Sydney for almost a decade. We offer various mortgage solutions to meet your specific financial needs. Consolidate your home loan with us today!