When it comes to applying for your mortgage with us there are several factors that will affect the sort of mortgage you apply for and what deals will work best for you. Most people are aware that your credit rating has a big influence, but we sometimes find that people are not always sure what one is and, if it isn’t the best, how to improve it.
What is your credit score?
Your credit score is based on a series of different factors in your financial and personal history. These include loans, credit cards, how well you have paid your regular bills, how much you have borrowed and whether you have defaulted on any payment. In short, it is an estimate of how creditworthy you are. The number can go up or down depending on how your circumstances change.
Does a low credit score mean you cannot get a mortgage?
Let’s dispel this misunderstanding right at the start. No, a low credit score will not necessarily stop you from applying for and receiving a mortgage offer. It may well change the mortgages available for you if you have a lower score, and certainly the higher your score the better, but it isn’t a full stop if yours isn’t the best. Come and talk to us and we will be able to look at options for you, but don’t let a low score deter you from looking at your options.
Can you change a low score?
Yes, there are often some simple steps you can take to increase your credit score. It can take time for these to be reflected in your score though so, again come and talk to us about your options.
Some things will affect your score more than others and your credit history goes back quite some time so if you have had a bit of difficulty paying in the past and have a court order for example, it could take a while for that to resolve.
One factor is not the whole story though and there are quite a few things you can do about your credit rating. The top of the list of things to do is take a close look at your report. There are quite a few places to see this such as Equifax, Clearscore and similar credit rating sites. Check your report carefully to make sure it has accurate information and report any anomalies to have them resolved. What you may not be able to see is exactly what that score means to lenders because it is a not fixed line in the sand. It can vary quite considerably as to what is considered too low. That is why you need to speak to one of our mortgage advisors before you assume the worst.
- Make sure you have registered to vote.
Being on the electoral role means you have a registered address and that will positively affect your score.
- Try not to apply for any more credit until your mortgage is all sorted, particularly if you have recently been turned down. Every time you apply for credit what is known as a ‘hard search’ is added to your record and lenders get nervous about too many of these.
- Try to build your positive credit history by paying on time. Lenders don’t object to you having some credit. It only becomes a problem when there is too much credit, or it is in arrears, and similar negative factors. Making sure your credit cards and loans are paid on time will help demonstrate that you are a good borrower. If you are renting, utilities and rent payments really do need to be kept up to date.
- Are you linked to someone with an adverse credit history? Living with someone who has bad credit or moving into a house where someone with a bad credit history lived, should not affect your score. The credit score is yours as an individual. However, if you have had joint loans with someone for example, that would be registered against you. Your credit report will show if you have any of these kinds of ties and, if they are incorrect, you can have them removed.
- Lower your outstanding debts. We touched on this in an earlier point. Lenders don’t like to see too much outstanding debt and it affects your affordability, which can be a factor in applications. It may not directly affect your score but the more you can show that you have money in the bank at the end of the month, and the less you spend on things like gambling, the better.
These are just a few of the things that you can do to improve your credit score. At the end of the day though, your score will change slowly, and it isn’t the only thing contributing to your mortgage application. We are here to help you into your new home and explain your options, whatever your credit score. The best option is to prepare for your application with the help of someone who knows the market, knows the lenders, and fully understands your situation. We will never advise a mortgage you can’t afford and will only give you the most appropriate advice for your circumstances… and we can only do that if you talk to us.