Planning the finances when buying your dream home is the crucial first step in the process of making it a reality. But what many of us struggle with, is getting it right. If you are going through a mortgage or home loan, various factors affect the interest rates, principal amount and the mortgage terms with Credit Score being one of them.

What then is a Credit Score?
A credit score is a numerical representation of your credit-worthiness, which is your ability to repay borrowed money on time. Your credit score is based on several factors, such as your payment history, credit utilisation, length of credit history, types of credit and recent credit inquiries.

1. Lower mortgage interest rates
A good credit score allows you to qualify for a lower loan interest rate. The difference in interest rates can make a huge difference in the cost of your mortgage over time.

2. Fast loan approval process
A high credit score can make the loan approval process much faster, thereby reducing the wait time and the stress you may feel when trying to secure financing.

3. Flexible loan terms
Strong credit score may enable you to get better terms on your loan, such as a bigger loan amount, a lower down payment and more flexible repayment options.

Having a good credit score is the first-most step to owning a home. Here’s how you can build a spotless credit score and make your mortgage application process easier
1. Pay your bills on time
This is the most important factor that affects your credit score, so make sure you pay your bills on time, in full, and in full each month

2. Keep your credit cards below your credit limit
This will show that you have good credit management and a knack for managing your finances well

3. Fix credit report errors
Always make sure to check your credit report for any errors and dispute them as soon as possible

4. Limit new credit inquiries
Too many credit applications in a shorter time frame can damage your credit score as it indicates credit dependency.

5. Have a healthy credit mix
Having multiple credit cards, instalment loans (such as car loans etc) and a good credit history can help your credit profile grow

It takes time and discipline to build a good credit score. However, it is undeniable that this will unlock the long-term benefits of your mortgage journey. You can put yourself in a good position to obtain the funding you need to make your dream of home ownership come true, if you prioritise sound credit management and take steps towards improving your score.