#Credit

Think you’re mortgage ready?

Have you checked your credit score recently? Or even ever?

Your credit score is one of the most important things to check before you think about applying for a mortgage. You can do this by using any one of a number of online services such as Experian, Equifax or Noddle. Check with more than one, if you can, as different lenders will use different agencies – and to make it even more complicated the information will not necessarily be identical on each of them!

Ideally it is best to first do this around 1 year before you are thinking of buying a house. This is because it will give you time to improve your credit score if it needs to be; remember it can take a lot longer to build your credit score up than it can to damage it. In addition, there could be errors on your report (things that are not true) and these can just as easily pull your credit rating through the floor. Once they are noticed they can be disputed – but this can take up valuable time if you are already in the application process when you find out!

Anyway, enough about why you should check your credit score. We’ve convinced you to do that now right? Great!

Now, how can you improve your rating? Or if it’s good ensure it stays that way!!

  • Get on the electoral roll. This is one of the simplest and quickest things you can do and without having done it you could struggle to get ANY credit. You can do this online at https://www.gov.uk/register-to-vote
  • Try not to miss (or be late) on any credit repayments – this is particularly important in the 12 months before you want to obtain a mortgage, although the effect of missed or late payments could stay with you for years.
    • TIP. Life is busy and we all forget things now and again – to avoid doing this with your credit commitments set up a direct debit to give yourself peace of mind that it is being paid every month.
  • Don’t financially tie yourself with anyone who has bad credit. If you have a joint mortgage, loan or bank account with someone who has a poor credit rating then this can affect you.
    • If you are no longer with someone that you have shared finances with then a good idea is to write to the credit agencies to tell them of this disassociation. This means that their credit history will not affect yours in the future. NOTE. make sure you have settled and closed any accounts that you have in joint names before you do this.
  • Make sure your address is right – even on old accounts. If an account is still open, even if you don’t use it then it could affect ID checks.
    • On this point CANCEL any old unused credit cards.
  • Don’t apply for too much credit in quick succession. What we mean by this is don’t apply for lots of credit cards or loans all at once. Space them out and even better – if you don’t need to apply for any at all in the 6 months leading up to your mortgage application then don’t.
    • If you are rejected don’t get sucked into the rejection spiral. E.g. you apply, you get rejected, you apply with someone else, you get rejected etc. The more you are searched the more you could possibly damage your score. Potentially avoid this by using an online eligibility calculator – these will give you an idea of where you are likely to be accepted.
  • Have bad credit? Try a credit re-builder card. This can help to avoid the catch 22 of having bad credit, being rejected for credit, not being able to improve your score. Just be aware that these cards usually have quite high APR’s so our recommendation would be to just spend a small amount on the card each month and ensure you repay it in full.
  • Have no credit? Having no credit can be just as detrimental as slightly bad credit. Consider opening a credit builder card and as with someone who has a history of bad credit just spend a small amount on it each month and ensure you are repaying it.
  • Avoid payday loans – these suggest poor money management skills.
  • Demonstrate stability on applications. If you have a landline then put that on the application rather than your mobile as this shows you are more stable. Another suggestion is to try to remain with the same employer and live in the same place for a period of time. All of these things are little points for you with the lenders.

 

So there are our tips. The rest is up to you! We hope this helps you to get just that little bit more mortgage ready and a step closer to that home ownership dream.