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Home loans and credit scores: What you need to know

Ideally, most of us would rather not have debt. For certain purchases, this is more than doable, however, for purchases that require large sums of money like a house or a car, credit is usually the most viable option. There are guidelines that creditors use in order to measure the financial risk involved in granting a specific individual credit. These guidelines give them your credit score, which is then used to determine whether they grant that individual credit, and if yes, how much credit. We’ll give you a few things to consider that can affect your credit score.

The number of inquiries against your credit score

The best way to know whether or not you are getting a good deal is to do your research by shopping around. Each time you request a quote for a home loan, the creditor inquires about your credit score. This means that if you request a quote from five different institutions, there will be five different creditors inquiring about your credit score and this may seem like you are desperate for credit, which can negatively affect your chances of being granted credit. The use of the services of a bond originator can help you avoid this. A bond originator will make the inquiry only once for all your quotes.

Maxing out your credit

In the eyes of the creditor, the maximum amount of credit available is there for the case of emergencies. When you max out your credit month in and month out, you lower your credit score. The misconception is that you just have to pay your installments on time. It’s always safer to use less than fifty percent of your credit available and ensure that all payments are made on time.

Lack of credit history

This is a tricky one for most people, especially young people who haven’t worked much. Having a credit history enables the creditor to look into the manner in which you pay your debts. If there is no history, they have nothing substantial to base their decision on, this could lead to difficulties in being granted a home loan.

 

It is in your best interest to be cognizant of what might affect your credit score negatively, and how you can improve it. Research and adopt good spending habits and your credit score will thank you. ????

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