Home LoanThe Importance of Your Credit Score in Securing a Home Mortgage

April 15, 2024

Your credit score and credit history has an important role in your chance of getting a home mortgage. Mortgage lenders utilise your credit standing to weigh your risk as a borrower and the lower your score history, the riskier you are to most lenders. To protect from this risk, lenders charge a higher interest rate the lower your score, all other things being equal.

Your credit score shows your past credit usage which lenders use to assess how responsible and credible you are with credit, that’s why credit scores really influence what mortgage rate a lender offers a borrower. Boosting your credit score is the best move to increase your chances of being eligible for a home mortgage.

Ways to Boost Your Credit Score

  1. Pay your bills on or before the due
    Late payments can affect your score significantly.
  2. Settle any late bills or accounts in collections
    These can also hurt your score considerably.
  3. Check your credit report for errors
    These should be reported to the credit bureau as soon as possible because correcting them can improve your score.
  4. Pay down your balances
    Higher balances equal lower credit scores. Using a high percentage of your available credit can also affect your score that’s why try to lower your overall credit standing as well.
  5. Keep your accounts open
    Having a long credit history can basically help boost your score.

Refinancing and Its Impact on Credit Score

Refinancing a home mortgage can be a financially good move in a lineup of different situations especially if you have a chance to get a lower monthly fee or a lower interest through the process. There are some scenarios in which refinancing might be helpful for you or a complete requirement. Refinancing can help save money or get a more affordable monthly payment but there are still situations where it’s best to keep the loan you have. Refinancing a home mortgage results in a hard inquiry and new debt added to your credit standing. These changes can temporarily affect your score. But your credit score can quickly bounce back if you make correct moves right after refinancing. Here are some tips:

  • Reduce credit use
    If you use a lot of charges in credit cards or overdrafts, it can be considered a sign that you don’t control your money well or that you’re living beyond what you can. This will make you less pleasing home mortgage applicant. Attempt to lower the use of these credits as soon as possible because this can give a positive impact on your credit standing. As much as possible, it is advised to reduce your debt before applying for a home loan in Sydney.
  • Check your credit score
    Your credit standing is not saved and only you and the credit agency will know about it and there is no conflicting effect from checking. So check regularly before you apply for a home mortgage. The checks are done online and are easy and simple to do. They are also free of charge. Knowing what your credit standing is with each credit agency will give you an idea for improvement.
  • Make sure to pay all your bills early or on time
    Keep all your accounts in good standing. Missed payments will lower your credit score as well as late payments can remain on your report for up to seven years. If you’re already late on a payment but still within the grace period, contact the lender or creditor right away to see if you can have options to get back on track. If you have a late payment on your record, make up to complete payments on time in the future.

How to Safeguard your Credit when Refinancing Home Mortgage

Refinancing a home takes a lot of time and effort and you have to consider additional costs. You also need to make sure that you keep an eye on your old home mortgage and avoid missed payments during the refinance. There may be a short period where it seems like you’re transitioning to the new home mortgage but you still have a balance to make a payment for on the old one.

Your new lender may tell you that you can skip your last payment on your old mortgage yet this can give a risk to your credit if the payoff for your old mortgage arrives later than expected or after your payment due date. Keep an eye out on your old home mortgage due and balance on a regular basis and make sure you know it’s paid off and the balance is zero before you skip a payment.

When is it not worth it to refinance?

Do not consider refinancing a home mortgage if the closing costs remove financial benefits. Also drive out of refinancing if the new mortgage will actually cost you more in the long term.

Australian Financial and Mortgage Solutions as your Partner

AFMS Group brags a team of experts specialising in home mortgage refinancing. Our experts stay at the top of market trends and new strategies to guarantee that you receive the best advice.

Australian Financial and Mortgage Solutions is a trusted company in financial services and has garnered the trust of countless homeowners across Australia. Our track record of amazing service speaks volumes with numbers of clients taking advantage of our strategic refinancing solutions. Whether you are looking at lowering your interest rates or tapping into your home’s equity, we have the expertise to guide you all throughout.

We have a commitment to trustworthiness. We take transparency as a priority, making sure that our clients are fully educated at every stage of the refinancing process. Our adherence to financial standards and client centric practices promotes enduring relationships built on mutual respect and trust.

Are you ready to traverse your financial future? Partner with Australian Financial and Mortgage Solutions today and get on a journey towards greater financial outcome. Contact us now to schedule a consultation with one of our knowledgeable advisors and discover how home loan refinancing can transform your life.