It could be that the person has been dreaming of buying his own house, however, is unsure if his present credit score to buy a house would permit the same or not. Therefore, the initial thing that the person needs to undertake is to get hold of the current credit score report and ensure that it is free from errors, as this would only affect the score. The chances of loan applications getting rejected can be high with a poor score. However, this does not mean that people having bad credit score are devoid of loans for purchasing their house and should stop dreaming. Although such people may come across financial providers offering poor credit home loans, the only issue faced them is that a huge down payment is to be paid by them and face a high rate of interest.
Importance of credit score to buy a house
The credit score does play a crucial role when it comes to applying for home loans. Majority of the lenders prefer their customers having a score of about 700. Some lenders could be willing to provide loans to people having lower scores, on conditions that the borrower has less or no debt and can afford large down payment.
How to increase the credit score to avail home loans?
There are present ways and means by which individual credit score can be pulled up. However, it may take a good amount of time but is very much possible. In the end, it is worth the try, since a good credit score is sure to help the person to avail plenty of offers from financial institutions in the future with low-interest rates. Also, he would be able to save a good amount of money in the process.
Useful tips to raise the low credit score
- People having existing outstanding balances on students loans, personal loans or car loans are to first pay them off without any delay to see improvements in the score.
- The credit card is to be used wisely, and the limit is not to be exceeded. Using the credit card frequently can help raise the score. Only those items and services whose amount can be paid back are to be availed, to avoid falling into a debt trap. This way, lenders can get the message that the borrower has been making some wise decisions and is financially responsible.
- The amount is to be paid on time, be it the principal and the interest or interest alone.
- It is better to diminish the debt about by paying them off slowly and as per convenience, as debts may act as a hindrance when trying to avail mortgage or loan for several years.
- It is not wise to have anyone allowed to co-sign the account. In case, that person does miss a particular payment; this would show up on the person’s credit report, something that would not be appreciated by the lenders.
What the person needs to understand is that the credit score does play a huge role when it comes to eligibility and approval for a mortgage. The lenders along with this are also likely to have a look at the individual’s monthly income, the capital or wealth held, debts incurred, etc.