How your credit score impacts your chance of getting a home loan

Most home buyers need to apply for finance, as most can’t afford to pay cash, and a good credit score is crucial to get approval on a home loan and for future financial success.

Steven Barker, head of home loans at Standard Bank, says your credit rating is attached to your credit record, arguably the most important piece of financial information about you.

"It’s a comprehensive record of your credit history – the money you have borrowed, whether you have repaid that money and if you repaid it on time. Every time you apply for a loan from any financial institution, this record is checked. A glowing history of consistently repaying debts on time and in full will bolster your chances of an approval, as it indicates to the bank that you are financially responsible. A bad credit record of missed and late repayments means the opposite."

He says you must know where you credit score stands before applying for home loan finance, and everyone is entitled to one free report every year from the various credit bureaus.

To improve your record:

Pay your bills on time.

Take out debt only as needed. Make certain you can afford the instalments and create buffers for interest rate changes.

Remember that applying for credit leaves a "footprint" on your record and financial institutions can view the frequency of credit applications.

"Even if buying a home is not on the cards yet, safeguarding your credit record should be, because you will need a good score when you eventually enter the market. Property is an asset – often a cornerstone of retirement strategies – so a long-term, protective view of your record will help you ensure future prosperity and wellbeing."