How to clear your credit score if you want to buy a house

Article summary

• Make sure you maintain a good credit record. A good credit record goes a long way to getting bank approval for a bond.
• Maintain a good credit record by clearing outstanding debts, and paying your bills on time
• Check your credit record for errors, and lodge disputes with the credit bureau if you find any.
• It usually takes about three months for improvements to your credit record to register.

A good credit record is your most important asset when applying for a home loan. It’s the first thing banks look at when considering your application.

So ensure your credit record is clean, and here’s how you can do that.

What is a good credit score?

610 is the minimum you need for your application to be accepted.

Anything lower than that makes getting a home loan extremely difficult.

Here’s a more detailed rundown:

• 781 to 850. Excellent.
• 661 to 780. Good.
• 610 to 660. Fair.
• 500 to 610. Poor.
• 300 to 499. Very poor.

Find out your credit score

You can find out your credit score by getting prequalified with ooba Home Loans, or using our free, online tool; the Bond Indicator.

Clearing your credit score

If your credit score is low, it’s not the end of the world. There are measures you can take to improve it.

1. Pay off your accounts.
2. Pay bills on time.
3. Check for court orders.
4. Check for errors.
5. Don’t apply for more than one loan at a time.
6. Avoid spending up to your credit limit.

1. Pay off your accounts

Store credit, cell phone accounts, and bank loans – especially for other assets, such as a car – are a good place to begin.

A credit card also has a strong influence on your credit score, so try to include at least one of these in the mix. Paying back your credit card balance has a significant impact on your score.

2. Pay your bills on time

Doing so at the correct monthly installment, or even a little more, will help build a good credit score.

3. Check for court orders

..and any other such black marks there might be on your credit record.

Resolve the issue by paying the outstanding amount. The court order will be removed once the credit bureau receives proof of payment.

4. Check for errors

You can check your credit report for information that doesn’t seem correct, such as late payments that were actually paid on time.

You can lodge these disputes with the credit bureau, though you’ll need to provide evidence in the form of supporting documentation.

It usually takes 20 days for the credit bureau to investigate such disputes and correct the record.

5. Don’t apply for more than one loan at a time

Doing so will signal to lenders that your financial situation is deteriorating.

6. Avoid spending up to your credit limit

Generally, you’ll want to keep your spending below a third of your credit limit.

How long will it take for improvements to show?

According to businesstech.co.za, improvements usually start showing up on the credit record after around three months, but it’s recommended to wait about six months before reapplying.

Apply to multiple banks

You can improve your chances of getting a home loan, even with a lower credit score, by applying to multiple banks. Some might be more lenient than others.

ooba Home Loans can assist in this. We submit your home loan application to multiple banks, allowing you to compare deals and pick the best one.

In addition, we offer a range of tools that can make the homebuying process easier.  Start with our Bond Calculator, then use our Bond Indicator to determine what you can afford. Finally, when you’re ready, you can apply for a home loan.