If you are hoping to secure a mortgage to buy a property, it is crucial to check that your credit score is as healthy as possible. We look at how to improve your score, giving you access to the best possible mortgage deals.
Securing a good interest rate for your mortgage can save you a substantial sum of money over time. Having a good credit score will mean that you have a better choice of lenders. Taking steps to improve your score in advance of applying for a mortgage could potentially mean that more offers are available to you.
Lenders will be looking for good financial habits when they check your credit score. They want to see that you are able to manage credit and that you pay your bills on time and in full.
1. Check your existing credit score
Credit reference agencies may have mistakes on their records that could damage your credit score. Check the details held in your name with the major agencies used by banks, generally Experian, Equifax and TransUnion. If they have any incorrect information, make sure you ask them to amend it, appealing where necessary.
2. Use a credit card but pay it off
Mortgage lenders need to see that you can manage credit, so you will ideally need to have a credit card that you use and pay off in full regularly. If you don’t typically use your credit card much, start putting everyday expenses on it. Make sure you clear it every month though and that the payments are made on time.
3. Make sure you are on the electoral roll
Check that you are on the electoral roll as lenders use this to check addresses.
4. Reduce the amount of credit you use
If you have available credit, try not to use more than 30% of this and if possible, keep it below 10%. Lenders can have concerns if you need to use a more substantial portion of the credit available to you.
5. Don’t move house
Try not to move house too much before applying for a mortgage. Lenders will want to see that you are settled and be able to tie you to a fixed address so that they can carry out a full credit check.
6. Pay your bills when they are due
Paying bills when they are due is particularly important. This includes utility bills as well as credit cards and store cards. Late payments will be a red flag on your credit report.
7. Don’t have lots of credit cards and accounts
While you do need to have some credit facility to show lenders that you are able to deal with it responsibly, having too many credit cards and store cards with a large amount of credit available to you is not ideal. Try to close cards that you do not use regularly. Make sure any that you do have are cleared in full each month.
8. Cut financial ties to individuals with poor credit scores
If you have joint accounts with someone who does not have a good credit score, close them. Similarly, if you are sharing a property with someone who has a poor credit score, this will also impact you. If you move out, make sure that you no longer have any financial ties to them, such as a joint bank account or your name on utility bills.
9. Don’t use your credit card at an ATM
Using a credit card at an ATM can be a warning sign to lenders that you are not managing your money well because of the high level of interest plus the fee that is payable on this type of transaction. Try to plan so that you do not need to use your credit card in this way.
10. Don’t take out new credit right before applying for a mortgage
Try not to take out a new loan or credit card just before you apply for a mortgage, as this can count against you and reduce your credit score.
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