Review your credit before you apply for a home loan

Your credit report is the basis on which lenders give you loans or credit. Whenever you apply for credit, lender will run a check through your credit report. The credit rating is a score given by credit bureaus after finding how well you are with your payments towards credit. If you make prompt payments, you get a positive rating and your credit score is increased. But if you make late payments, miss payments and go over the credit line, you are impacted with negative score. All of your financial credit related activities are recorded in the credit history.

Your credit score is an assessment of credit score. It is this score which will enable the creditor to understand if a particular person is a credit risk or not. Fair Isaac Corp computes the credit score by using 22 pieces of information from three major credit bureaus, viz; TransUnion, Experian and Equifax. While 300 is the lowest credit score, 850 is the highest credit score. So when you apply for credit, lenders will check your credit ratings. If your credit score is between 700 and 850, you have a very good credit score, and you are entitled to a loan quickly, be it for a personal loan, credit card or for a home. Also they get flexible repayment terms and low interest rate. If your credit score is between 500 and 619, there is a low chance of getting you loan application approved. If they do get approved, they are termed as ‘loan against bad credit’. This implies that you may have to put collateral as a security for these also. You also get these loans on stricter repayment conditions and a higher interest rate.

Whenever you apply for credit, the information shows up on your credit report as a ‘hard inquiry.’ This has a negative marking on your credit report. So it is important to know that you cannot go on casually asking for credit because they can impact your credit score. A lot of people are not aware of this fact. There is also something called ‘soft inquiry’ which is related to asking a copy of our credit report. Soft inquiries do not impact your credit score, so it is perfectly fine to ask for credit reports. Besides, it is very good to go through your credit report so that you can bring it to the notice of the credit unions concerned. By law, credit unions are required to hand out a free copy of the credit report to an individual with the latest updated credit score. You can even download them from the official websites of credit rating agencies like Equifax and TransUnion. So make sure that you have an updated credit report on your hand, and take time to run though it, so that you can have any discrepancy corrected, if needed.