« Back to BOE Blogs

Building Your Credit

Published: January 2020
Author: Bank of England Mortgage Staff

Having a high credit score is important if you are applying for a loan either for a new home or for renovation of a current home. Your score is important because it tells your lender how responsible you are with money. If you have “maxed out” your cards and take a while to pay them back then your credit score may be low. This tells the lender to be more hesitant when lending you a home loan. But on the other hand, if your credit score is high a lender will be more willing to give you a larger loan with lower interest.

If you have been claiming the standard deduction up until now, the extra write-offs from owning a home almost certainly will make you an itemizer. Suddenly, the state taxes you pay and your charitable donations will earn you tax-saving deductions, too. So make sure you know about all these breaks that may now be available to you:

Building Your Credit
Having a high credit score is important if you are applying for a loan either for a new home or for renovation of a current home. Your score is important because it tells your lender how responsible you are with money. If you have “maxed out” your cards and take a while to pay them back then your credit score may be low. This tells the lender to be more hesitant when lending you a home loan. But on the other hand, if your credit score is high a lender will be more willing to give you a larger loan with lower interest.

What is classified as “high” and “low” credit scores? A credit score in the 700’s or above is considered an excellent score. A borrower should get a lower interest rate with a score this high. When a score gets into the mid 600’s is when lenders may start to say no and offering higher interest rates. Anyone with credit score in the 500’s or lower will struggle to get a loan.

But do not fret if your score is lower you can always work on building it up. Building your credit is as simple as buying your necessities with a credit card and paying it off before the payment is due. Another rule of thumb is that just because you credit card limit is $1000 does not mean you have to spend that much. You can simply put $20 on it and pay it off. Building your credit is just building trust with your bank. They need to know that you will pay them back with little things before they lend you a large sum of money.