How mortgage ready are you?
When it comes to getting on the ladder there are multitude of factors to consider, one of the most important undoubtedly being your credit score. A bad credit score severely impacts your mortgage borrowing prospects and can make getting on the ladder a real struggle. But don’t worry - there’s hope yet! Having a poor credit rating isn’t some unfixable problem, all it takes is a bit of time, consistency and before you know it you’ll have lenders lining up to fund your first venture into the property market.
Which factors determine your credit score?
Credit scores are created by compiling a vast amount of data, this is then used by lenders to decide whether or not you’re eligible for financial products such as a mortgage or credit card. The data used to create your credit score comes from a number of sources, and as such it’s important to be aware of the different factors which can impact your score.
It may seem strange but being on the electoral roll can actually influence your chances of being approved for credit, prospective lenders will often use it to check the basics (about you) and confirm if your credit record shows the correct address details.
Whilst lenders and credit reference agencies cannot see if you’ve been rejected for credit before, they can, however, see that a credit search (application) has been made on your behalf. Lenders are less likely to accept you for credit if you’ve made a number of credit searches in a short period.
Should you be financially linked with anyone else, for example - if you had a joint bank account with a partner or friend; any late payments or debt on their part could negatively impact your score.
Last but not least is your financial behaviour across credit cards, loans, bank accounts and even utility and phone bills from the last six years. Any late payments or outstanding debt will reflect poorly upon you and effectively lower your credit score.
How do I check my score?
Checking your credit rating before applying for a mortgage is a very good idea, as it will give you an indication of the type of mortgage offer you can expect to get. We have partnered with UK Credit Ratings making it even easier for you to access your credit report online. Simply fill out their registration form online and you can have your up to date credit report instantly. Once you have gone through your credit report, you may feel you could improve the score you currently have. Below are a few tips and suggestions on how to do exactly that.
How can I improve my score?
Now that we’ve covered the key factors which influence your credit score, we can discuss what you can actively do to improve your score moving forward.
Let’s start with the basics. If you haven’t already, make sure you register on the electoral roll. Credit reports contain a lot of data and unfortunately sometimes not all of it is accurate or up-to-date. Be sure to scrutinise your credit report for mistakes and dispute them, as they can potentially affect the interest rates on your mortgage moving forwards.
Consistency is key when it comes to proving your financial reliability to prospective lenders. It is essential you begin making all payments on time and start actively paying off your debts. Missing a payment and receiving a CCJ (County Court Judgement) will lower you score and stay on your record for six years. Other factors which will demonstrate your consistency to lenders include; having a long-term employment history and living in one place for a considerable period of time. Should you be financially linked with anyone ie. a friend or ex-partner, be sure to both de-link yourself and contact credit agencies asking them for a notice of disassociation.
When it comes to managing your current credit, keep these key tips in mind:
Don’t make too many credit applications in a short period of time, spread them out and try only to apply when you know you’ll be approved.
Don’t open any credit cards that you don’t need.
Close any accounts which you aren’t actively using, as lenders look at the total amount you have access to.
Don’t take on any new debt before applying for a mortgage - this includes credit cards.
Take advantage of a 14 day free trial currently available with UK Credit Ratings and take control of your credit report today.