Buying a house and lot in Alabang Muntinlupa – one of the best places to buy a residential property in Metro Manila, is a major achievement on one’s part. This however is in the case of being granted a housing loan with favorable terms owing largely to a good credit score. Credit scores are an indication of an individual’s ability to repay borrowed money and aid lenders in deciding how risky it would be to lend money to you. If you want to purchase a house and lot in Alabang, improving your credit score can help you secure a mortgage with lower interest rates.
Know Your Credit Score
It is noteworthy that before evaluating any improvements, one must appreciate the meaning of the credit score and the constituents of its composition. Credit ratings in the Philippines are primarily between 300 and 850. A rating above seven hundred is good, and a rating below six hundred is likely to restrict obtaining loans at favorable rates.
The following factors affect your credit score
Payment History (35%)
Making payments on credit cards, loans, and any other obligations without delay has a favorable effect on your credit rating.
Credit Utilization (30%)
The measure of your unused credit card capacity against the total credit card limit provided. When one spends over 30 percent of their credit limit it is established that it shall adversely affect one’s credit rating.
Length of Credit History (15%)
It is advisable to take credit after some time. Likewise, credit clients are viewed favorably if they have a history of managing credit over a long period.
New Credit (10%)
Requesting several accounts over a short space of time may negatively impact your credit score.
Credit Mix (10%)
The variety of types of credit such as credit cards, installment loans, and mortgages helps in raising your score.
Check Your Credit Report for Errors
Your credit report elaborates on the full extent of the credit accounts maintained along with the payments and the inquiries made by the individual. Any error or inaccuracy recorded in one’s credit report would be negative on a credit score. Thus, it is advisable to seek a credit report from the Credit Information Corporation (CIC) or other credit bureaus in the Philippines before the commencement of the home-buying process.
Pay Your Bills on Time
The fastest means of boosting your credit score is consistently paying your bills on schedule. An overdue account will lower your credit score and may remain on your credit report history for seven years. If you have credit card’ outstanding balances or loans, try to settle them before they are charged off.
Reduce Credit Card Balances
The proportion of credit used against the total limit extends to the calculation of the credit score. Therefore, credit utilization should be capped at 30% of the total credit limit. To illustrate, if the total credit limit is 100,000 pesos, the advising debt would not exceed 30,000 pesos.
Avoid Applying for New Credit
Whenever a new credit card or any loan is applied for, the lender submits a hard check on the credit report and thus this check may lead to a drop in the credit score. In case, you are considering purchasing a house and lot in Alabang, it would be prudent to refrain from applying for any new credit for at least six months prior to the time you would want to apply for a mortgage.
In addition, since getting additional lines of credit raises your debt, lenders may not be inclined to underwrite your mortgage application. Therefore, refrain from incurring further debt, but rather concentrate on maintaining your current credit in a healthy state.
Consolidate Your Debt
When you have more than one high-interest debt, it is advisable to consolidate them by taking a loan with a reasonable interest rate. This will not only make it easy to manage the debts but also pay them off. What debt consolidation does is that it aids in lessening the amount requiring monthly payments and enhancing credit usage which contributes to bettering one’s credit ratings. Take care of the debt consolidation terms and fees and make sure that you can afford the monthly payments or risk going deeper into debt.
Keep Old Credit Accounts Open
One factor that affects the credit score of any individual significantly is the average length of credit history. It is good if the accounts have existed for a longer period. In case you have some older, unused credit cards or some old loan accounts which are still in good standing practice, do not close them down especially if you do not need them at that time. Doing so can reduce the length of your credit history and this in turn will lower your score.
Moreover, maintaining active accounts with no balance enhances your credit utilization ratio which in turn helps increase your score. But, beware of any inactivity fees that certain banks may impose on their non-active accounts.
Diversify Your Credit Mix
Various types of credit accounts like credit cards, auto loans, and personal loans among others, when combined, can help boost one’s credit score. For those who have credit card debt only, taking an installment on a loan (like a personal or auto loan) may diversify the credit mix.
Nonetheless, exercising caution would be advisable so that you do not burn yourself out by accumulating debts you would be unable to repay. The idea here is to show lenders that you can manage credit in different forms, hence reassuring them of your credit capacity.
Seek Professional Financial Advice
If information on credit score improvement and financial management is unavailable, it is recommended to speak to a financial advisor or a credit counselor. They can assist you with budgeting, come up with a debt repayment schedule, and provide helpful insights on how to make your credit better.
In the Philippines, there are some banks and financial institutions that have free financial advising services for their customers. Availing of these services can be beneficial particularly if you want to be guided on how to go about achieving your dream of owning a home.
Key Takeaway
Secured loans that bear reasonable interest rates will be possible to get out in case you improve your credit score before buying a property and a house in Alabang. It is possible to improve your creditworthiness, understand how the score is arrived at, and perform some corrective measures like paying the bills on time, lowering the amount owed on credit cards, and refraining from taking more credit. This is advantageous since a high credit score not only increases the chances of getting a loan but also enjoys better rates and lower repayment plans.