Before you apply for a mortgage, it’s a good idea to review your credit score first to establish if you need to do any work to improve it. Many of the techniques below will certainly help boost your score, but almost all will need to be done months in advance of your application to avoid your application being rejected by lenders.
Tips for boosting your Credit Score
When handling a mortgage application, a lenders main concern is that you can meet your monthly repayments comfortably. Carrying out a Credit Check is their means for doing this as it helps them gauge how responsible you are at managing credit and enables them to predict your future behaviour based on your previous spending history with an overarching Credit Score.
It’s worth noting that there are many people who have no credit history – these are generally those who have never had a credit card, loan or any form of fixed term debt before applying for a mortgage. While you would imagine this would work in your favour, to a lender it means you have no Credit History resulting in a poor Credit Score and a possible rejected application.
Whether you need to improve your Credit Score or simply need to create one, here are 11 fast and easy tips to help improve your credit score:
1. Get On the Elector Register
If you're not on the electoral roll, it's much harder to get accepted for credit, so sign up straight away. You can sign up here (Northern Ireland only): http://www.eoni.org.uk/Register-To-Vote/Register-to-vote-change-address-change-name
2. Check your Credit Report
Once you get your file, check it thoroughly for errors. Should you be unsure or would like some assistance, our mortgage advisor Rob Adams would be more than happy to help you. Just contact him on 02825651112 or email Robert.email@example.com If there is anything listed on the file which you believe to be incorrect, ask the agency to correct it. You can add a ‘Notice of Correction’ to your file explaining why it’s unfair or how the circumstances arose. If the credit reference agency won’t help you, you can submit a complaint to the Financial Ombudsman.
3. Never Miss or be Late on any Credit Repayments
Be one step ahead and set up a direct debit to cover the minimum repayment on any credit cards or credit arrangements so that you’re never late with your payment or miss any. Where you can afford, it’s a good idea to make additional payments on top of this to clear the debt sooner.
If you ever find yourself having trouble meeting payments, contact the lender who will hopefully try to help. Changing your repayment schedule is preferable to you defaulting and although it will have an impact on your credit score, it's better than a court judgement against you.
4. Check Addresses on your File
This is one thing people often overlook but when checking your credit files be sure to check your address is up to date on all active accounts (even ifyou no longer use them).
5. Financial Link
If you are financially linked to someone on any credit product, their files can be accessed and looked at when assessing yours. Even a joint bills account with flatmates can mean you are co-scored. If your partner/ flatmate has a history of poor credit, keep your finances separate.
Where necessary you can also write to credit agencies asking to be delinked from any ex-partners/ friends/ flatmates you had joint finances with. This prevents their credit history affecting yours going forward.
6. Never Withdraw Cash on a Credit Card
This is specifically noted on your file. It’s frowned upon as its incredibly expensive and not a good sign. It looks like you’re desperate for cash and can’t live within your budget.
7. Keep other Applications to a Minimum in the Months Before you Apply for a Mortgage
Applications, whether successful or not go on your file, so space out applying for anything that adds a footprint to your file (including car insurance and mobile phones).
A lot of applications in a short space of time makes you look credit hungry and can indicate financial difficulty. Keep these off your file in the months before applying for a mortgage. You should prioritise your mortgage if that’s the most important thing and hold others off until you’ve got it.
8. Make Paying your Rent Boost your Credit Score
If you consistently pay your rent on time, use this to your advantage to help boost your credit rating. Private tenants can opt into the free Rental Exchange scheme which records your rental payments and sends the results to credit reference agency Experian.
When you opt in you will start paying your rent to a third party called Credit Ladder. Credit Ladder will then pass on your payment to your landlord or letting agent. They then tell credit reference agency Experian whether you've made the payment on time. Experian then updates your credit file accordingly.
This is a fantastic way to improve your credit score, however if you are going to be late on a rent payment this will have a negative effect on your credit score. So before you sign up to this scheme, make sure you consider the impact of any potential late payments.
More tips to boost acceptance chances include:
9. An extra £100 can secure a mortgage
Adding just 0.1% more than the minimum deposit can boost your acceptability, or at least cut the amount of documentation the lender wants to see.
For example, imagine you’re applying for a 75% maximum LTV loan on a £100,000 property.
Instead of just putting £25,000 down, put down £25,100. That extra 0.1% could help speed up the application process.
10. Stay out of your Overdraft
If you’re constantly using your overdraft this could be seen as living close to the edge of your finances, so avoid using your overdraft where possible. Bear in mind that some lenders may not tolerate you being in your overdraft at all in the last three months.
11. Avoid Payday Loans
A few mortgage underwriters (the people who decide if you’ll get a mortgage) simply reject anyone who’s got such a loan as it indicates poor money management. If you are living on the bread line each month you need to reconsider if you can afford a mortgage at this stage.
We hope you found these tips useful and if you have any questions or queries around some of the issues discussed or simply want to chat with our team, please get in touch with us on firstname.lastname@example.org