(The below blog has information contained which was correct at the time of publication but is subject to change)
As part of a mortgage application we review your credit file, because this is what mortgage lenders see first. Here are some ideas on how to manage your file and score.
Tip 1: Voters are more visible to lenders
Being registerd to vote means creates are reliable sources of information for mortgage lenders – and is highly beneficial when a lender needs to verify your identity. To find out how to register, go to the About My Vote website. To check if your details are correct on the electoral roll, contact your local council.
Tip 2: Know your credit every time you apply - Check Equifax AND Experian
Before you apply for any form of credit, make sure that you know whether there is anything in your credit rating that might cause you to be rejected.
When you apply for a mortgage, the first thing lenders do is to check your credit file. Whatever is registered on your credit file is taken as fact. - even if it is incorrect or false. It is therefore vital to ensure ensure that your credit file is up to date and accurate. Errors can be amended, but it takes time. for a credit agency correct it.
Incorrect information could down-grade your status and even result in a declined mortgage application.
Tip 3: Multiple applications - avoid
A lot of credit applications in a short space of time could be interpreted as evidence that you are struggling to keep up with your obligations, so even if you are shopping around for options, try to space out your applications for credit.
Tip 4: Hard or soft search?
Some companies will agree to do a “soft search” or quotation-only search, which doesn’t appear on your credit file, and this can be useful for protecting your rating. Make sure you know what type of search they will be conducting – and avoid unnecessary full searches if you can.
Tip 5: Taking out more credit before or during a mortgage application
The more credit you have the more it impacts the "affordability" of your mortgage. All lenders assess income and debt and commitments before agreeing to lend. If you borrow a lot pn s credit card then lenders may reduce how much they will lend to you.
If you want to buy a house, make sure that you avoid expensive credit commitments where possible. Also don't make a mortgage application and then buy a Mercedes on finance. Lenders carry out checks on application and also before the application completes, so you could end up losing the house you want to buy if they withdraw the mortgage offer.
Tip 6: Play your credit cards right (and don’t hold too many of them)
If you have credit cards (including store cards) that you don’t use, the lines of credit will still be shown on your file – and some lenders will believe that you have too much potential credit available to you. Some lenders (especially those who score on debt to income ratio) will automatically decline an application if there is too much available credit on your file.
Don't fall for the commonly held notion that lots of credit cards are a good thing and boosts your credit score. Multiple credit cards with high levels of available credit can be very damaging.
Cancel cards you no longer use.
Don’t overload your credit cards though, as lenders also look at the percentage of your available credit that you use.
Keep address registered up-to-date. Having different addresses on your credit file can be a risk factor for lenders.
How you use credit cards is extremely important. Using cards to live on and running a consistently high credit balance can be taken as evidence of bad financial management.
Tip 7: Building and renovation work
Avoid using credit cards for capital purchases and running high long term balances to pay them off. This can also be seen as poor financial management. If you have to use a card to pay for high value items, make sure you can plan to pay off the balance quickly.
Use a bank loan instead - that is seen as planned financial management and is far more acceptable.
Tip 8: Build up your reputation
A mortgage lender needs to look at how you have used credit in the past., so manage credit responsibly and stay within agrered limits.
Make certain that you never miss a payment on credit cards, loans and utility bills.
Use direct debits to help you pay on time, although you will still need to ensure that there is enough money in your account.
Avoiding credit altogether won’t give you a positive credit rating, since it means loan providers don’t have access to information about your reliability.
If you are considering applying for a mortgage with a lender, then it can help to build up a relationship with them beforehand. Having a current account can help to give them a first-hand view of your cash flow and your reliability, as can making regular payments to a savings account to build up a deposit for your home.
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