5 ways to improve a credit rating

If you are planning to buy a house or refinance your  home loan in 2016, you’ll want to check your credit rating and look for ways to improve it. The higher your score, the better you look to a mortgage lender, and the more likely you’ll qualify for the home loan you want, at the best possible interest rate.

You might be surprised at how easy it is to improve your credit rating.  You can check your credit history online in New Zealand at no charge from reporting agencies such as Centrix, Dun and Bradstreet, Veda. For a fee, you can obtain your credit score, the number used by lenders to rate borrowers for credit purposes.

To improve your credit score, here are a few do’s and don’ts to follow before you apply for your home loan.

  • Don’t shop around for a home loan by putting in several applications before you are ready to buy. Credit application activity is a red flag to lenders. With each application, your score drops.
  • Don’t request consumer credit too many times within a short period. It’s tempting to apply for new credit cards from stores, especially during the holidays, to qualify for special offers. Just remember, it will reduce your credit score. Is that $25 discount really worth a black mark on your credit history?
  • Don’t default on a loan. If you are tight on money and starting to struggle, always call your lender and explain the situation, and try to keep up as much as you can with the payments
  • Do  try to make good on old debts if you have any record of a default.
  • Do have at least some history of credit payments.  This is for young people and anyone just starting out, and it shows lenders you can handle the responsibility of loan payments. You can start building a good credit history by taking on a credit card with a low limit and paying off the balance each month.