Being financially healthy is a mission most adults are on. It’s not all about having savings or some money in the bank, though; another major part of it comes in the form of a number unrelated to how much cash you have: your credit score. It’s incredibly important, too, as your credit score dictates a lot of things, from whether you can get a phone contract to the type of mortgage you can get.
If You’re Buying a Home, Your Credit Score Matters A Lot
Your credit score is essentially a rating that tells lenders how responsible you are with money. Specifically, whether you consistently pay money back. No mortgage lender will want to give you a load of cash to buy a home if they’re unsure of your financial stability!
It’s All About Securing a Mortgage
There are a few factors that play a role in the type of mortgage you get (and whether you can get one at all). That includes your deposit size, income, and, of course, credit score and history. The higher your credit rating, the more likely a mortgage lender will give you a favourable deal. Remember that, even if you already have a very great credit score, you still need to be careful with the type of deal you end up with. Using a mortgage advisor is always essential, one like Everest Mortgages will take into account things like your deposit and credit rating, and find a deal most suitable for you.
What is a Good Credit Score?
It helps to know what makes a good credit score! Each credit reference agency categorises it slightly differently. Here’s what Experian uses:
- Poor: 561 – 720
- Fair: 561 – 720
- Good: 721 – 880
- Very Good: 881 – 960
- Excellent: 961 – 999
While there is no exact number you need to get a mortgage, a minimum credit score of 670, which falls into the “fair” category, is generally considered necessary to be able to get a mortgage. Of course, the higher the credit score, the better, with most people wanting to aim for being in the “good” category before attempting to get a mortgage, which is certainly a sensible endeavour.
How Can You Increase Your Credit Score?
Is your credit score less than perfect? Not all hope is lost. While it’s true you’re unlikely to secure a good mortgage deal in the very near future, there are steps you can take to make that rating far healthier than it’s ever been. Here’s how to improve your credit score:
- Make your payments on time, every time
- Don’t apply for too much credit
- Build a credit history
- Report inaccurate credit information
- Be strategic when paying credit card bills
The Bottom Line
There is no denying just how important your credit rating is for securing a mortgage. The higher the credit rating, the more likely you are to get a better deal, so you won’t pay as much in the long term. If your credit rating is less than good, it’s best to delay getting a mortgage and work on improving it first.