Credit scores are a huge part of securing a mortgage. They not only affect whether your application will be approved, but also how much a lender will let you borrow and what interest to charge you. Our Huddersfield-based mortgage advisor explains more here…
It’s crucial that you have a good rating when applying for a mortgage. There are a number of ways to improve your score, but first, you need to know where you stand.
Where can you check your rating for free?
In the past 12 months, many providers have started to offer a free service for checking your credit score.
- Experian (via Money Saving Expert’s ‘Credit Club’)
How do you know if you’ve got a good credit score?
Each lender has different criteria for rating you as they all use their own scoring systems, however a credit report from any of the above agencies will be close to that of a bank.
A good score is measured as follows:
880 out of 990 (Experian)
420 out of 700 (Equifax and ClearScore)
4 out of 5 (Noddle)
How to improve your credit rating:
If you’ve got an excellent record, then well done for being money-savvy. But if you’ve got some improving to do, then fear not, because we’ve put together some simple tips that can help you to boost your rating in the next 6-12 months:
1. Register to vote
If you’re not on the electoral roll, this could have a negative effect on your application. Being registered enables the lender to confirm that you are who you say you are and that the details you have provided are accurate. We’re told time and time again how important this is, but it’s easy to forget in all the flurry of moving home. Register online at gov.uk.
2. Use a credit card little and often
Lenders predict your future behaviour by looking at your past transactions. So regularly using your credit card will provide evidence that you can borrow money and pay it off. If you feel uncomfortable, then just spend £50 a month and settle the balance in full each time.
3. NEVER make a late credit payment
Or worse, miss one! The easiest way to remember to pay your statement, is to set up a direct debit to make your minimum deposit, and then manually put more towards it each month. Missing a payment can seriously affect your rating.
4. Check if someone else’s score is affecting yours
If you have a joint bank account with a partner or flatmate who has bad credit history, it can affect your own ability to get a mortgage. Try to keep your finances separate!
5. Avoid multiple applications and complete ‘soft searches’ first
Searching and applying for credit multiple times within a short period can put a black mark against you. Most people don’t realise but even looking for car and home insurance on comparison websites can lead to a credit check, for example.
So, before you make a loan request, ensure that you are eligible and try to use a lender that will complete a ‘soft’ search first, which won’t appear on file. That way other lenders won’t see that you’ve made an application recently.
6. Don’t withdraw cash on your credit card
Not only is this costly, but a lender will view it as poor money management and can affect your overall rating.
7. Pay off existing debt
If you have substantial debt levels, you should try to repay/reduce these before applying for a mortgage. A lender may be hesitant to let you borrow more if you already have a large loan.
8. Consider a credit rebuild card
If you have a poor rating, then getting a credit card will be difficult work. But rebuild cards, which charge extortionate APRs, will accept people with a bad loan history. And, if you can pay off your card in full each month, you won’t be charged interest. Again, just spending a small figure can make a big difference after 6-12 months.
9. Avoid pay day loans
These are a big ‘no-no’ in the eyes of a lender! They demonstrate a lack in ability to handle your money, and most banks will instantly decline an application if you’ve had a pay day loan recently.
If you’re currently building your credit rating in the hope of securing a mortgage in the near future, then get in touch for a no-obligation consultation from our Huddersfield-based mortgage broker. We can provide mortgage advice and give you hints/tips on your affordability. Plus we know the lenders who are most likely to accept you!
Call 07834 818805 or email [email protected] if you’re looking to speak to a mortgage advisor in Huddersfield, Holmfirth, Brighouse or Halifax.
Your home may be repossessed if you do not keep up repayments on your mortgage.
Approval number: Sol5985