Your credit profile is one of the most important factors lenders evaluate when considering your loan application. A strong credit profile not only increases your chances of approval but can also help you secure better interest rates and terms.
At Homely Capital, we understand the importance of a solid credit profile and are here to guide you through the steps to strengthen it. Whether you’re applying for a home loan, personal loan, or refinancing, here’s how to position yourself as a reliable borrower.
1. Understand Your Credit Report
Your credit report is a detailed summary of your borrowing history.
- Why it matters: Lenders use this report to assess your repayment habits and determine your risk level.
- What to do: Obtain a free copy of your credit report from agencies like Equifax or Experian. Review it for accuracy and dispute any errors immediately.
2. Pay Your Bills on Time
Timely payments are one of the most critical factors affecting your credit score.
- Why it matters: Consistently paying on time shows lenders you’re responsible with credit.
- Pro tip: Set up automated payments or reminders to avoid late fees.
3. Keep Your Credit Utilisation Low
Your credit utilisation ratio is the percentage of your available credit you’re currently using.
- Why it’s important: High credit utilisation can indicate financial stress, which may deter lenders.
- How to improve: Aim to use less than 30% of your total credit limit.
4. Reduce Existing Debt
The less debt you carry, the stronger your credit profile appears.
- Why it matters: Lower debt levels reduce your debt-to-income ratio, making you more attractive to lenders.
- Next steps: Prioritise paying off high-interest debts like credit cards or personal loans.
5. Avoid Too Many Credit Applications
Each loan or credit card application triggers a hard inquiry on your credit report.
- Why it matters: Multiple hard inquiries in a short period can lower your credit score and signal to lenders that you’re financially unstable.
- What to do: Only apply for credit when necessary, and research options thoroughly before committing.
6. Maintain a Healthy Credit Mix
Having a variety of credit types—such as a credit card, car loan, or mortgage—can strengthen your credit profile.
- Why it helps: A diverse credit mix demonstrates your ability to manage different types of credit responsibly.
- Note: Avoid opening new accounts solely for diversity; focus on managing existing credit well.
7. Build a Credit History
A longer credit history works in your favor as it gives lenders more information about your financial behavior.
- How to build it: Start with a small, manageable credit account and use it responsibly over time.
- Tip: Avoid closing old accounts unless absolutely necessary, as they contribute to your credit history length.
Bonus Tip: Work with a Professional
At Homely Capital, we specialise in helping individuals strengthen their credit profiles and navigate the loan approval process. Our experts can provide tailored advice to improve your creditworthiness and increase your chances of approval.
