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When it comes to applying for a home loan, your lender will review your credit history to see whether or not you have a good financial background.

If you don’t have a great credit past and instead have a financial history that is littered with late bill payments and defaults, you may find it tough negotiating with a lender for a home loan.

Thankfully, a bad credit history doesn’t have to destroy your dream of property ownership. There are five easy things you can do to clear up your financial history, including:

1: Pay down your credit balances

Credit card debt can ruin your credit rating. Carrying a high percentage of debt in relation to available credit drags down your credit rating, so it is important to focus on paying down these balances.

Consider living on a tight household budget while you are paying down your debts. Revolving credit like credit cards should be paid off as quickly as possible. You’ll even save money with this method by avoiding the high interest rates associated with revolving credit. If you are the type of person who will use your credit card so long as it is in your wallet, it might be worth cancelling your card once you have finally cleared it.

2: Improve your payment habits

Your payment history accounts for 35 percent of your credit rating, so it is essential to keep your payment history positive. Don’t panic if you already have late or missed payments on your credit report. It’s impossible to erase the past if this information is accurate, but your credit report only reflects seven years of credit history. Making a commitment to pay on time now will boost your rating in the long term.

3: Keep old accounts open

You may think that it’s beneficial to close old accounts that you no longer use, but closing these accounts can actually decrease your credit rating. A portion of your rating depends on the length of your credit history. A long credit history is considered to be beneficial, so you want to keep old accounts open to make your overall credit history as lengthy as possible.

4: Be cautious about new credit

Applying for a credit card or loan is an activity that is reflected on your credit report. Too many applications in a short period of time can have a negative impact on credit history. Opening many new accounts can also make it more difficult to manage your credit. Only apply for credit when it is absolutely necessary.

5: Maintain a mix of credit

Finally, it is always a good idea to maintain a good mix of credit.  The reality is lenders want to see a mix of credit types to ensure that you can handle different types of credit. Mortgages, auto loans, credit cards and personal loans are all different types of credit.

It’s important to understand that even if you have had credit issues in the past there are still options out there to help you move in to property ownership.

As your local Hunter Valley Mortgage Broker I can research and find the most suitable product for your situation. Call 0435 945 419 for more details on how I could assist you.