Improve your credit history and secure the right mortgage

March 21, 2015
David Thomas

If you are looking to take out a home loan in the short to medium term, it is important to have a good credit history.

Your potential lender will look at your credit history to see whether or not you are a good borrower. If you have a history that is littered with late payments of defaults, your potential lender may choose not to lend you money.

If you do have a fairly unsatisfactory credit history, don’t despair.  There are a few easy things you can do to improve your credit score and ultimately help you on your path to obtaining finance.

 Step 1: Pay off your bills

If you want to look like a good potential borrower, it is important to have little to no unpaid credit card debt. The reality is credit card debt can ruin your credit rating. Carrying a high percentage of debt in relation to available credit drags down your credit rating, so it is important to focus on paying down these balances.

Consider living on a tight household budget while you are paying down your debts. Revolving credit like credit cards should be paid off as quickly as possible. You'll even save money with this method by avoiding the high interest rates associated with revolving credit. If you are the type of person who will use your credit card so long as it is in your wallet, it might be worth cancelling your card once you have finally cleared it.

 Step 2: Get in the groove

While we have all done things in our past that we are less than proud of, you don’t have to let your past control your future. If you have a history of late payments, change that pattern today. Get in the right groove with your payment habits and make sure everything is paid on time. Your payment history accounts for 35 percent of your credit rating, so it is essential to keep your payment history positive.

 Step 3: Don’t close accounts for the sake of it

You may think that it's beneficial to close old accounts that you no longer use, but closing these accounts can actually decrease your credit rating. A portion of your rating depends on the length of your credit history. A long credit history is considered to be beneficial, so you want to keep old accounts open to make your overall credit history as lengthy as possible.

 Step 4: Be careful about taking on new debt

Applying for a credit card or loan is an activity that is reflected on your credit report. Too many applications in a short period of time can have a negative impact on credit history. Opening many new accounts can also make it more difficult to manage your credit. Only apply for credit when it is absolutely necessary.

Step 5: mix it up

Finally, it is always a good idea to maintain a good mix of credit.  The reality is lenders want to see a mix of credit types to ensure that you can handle different types of credit. Mortgages, auto loans, credit cards and personal loans are all different types of credit.


For further information, and to put yourself in the best position with valuable information and guidance, contact a trusted consultant from Mortgage Choice on 07 3286 7711. 

Posted in: Tips

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