The reality is that if you’re unfortunate enough to have a less than ideal credit score, sometimes by even just a few points, you could struggle to be approved for a mortgage. With more and more would-be first time buyers looking to get out of the rental market and onto the property ladder, young people are frantically looking at ways to improve their credit scores to make themselves financially more attractive to lenders. The questions which are often asked, however, generally revolve around the best ways to boost your credit score, even if you’re almost entirely debt free, as some first time buyers are, of course! Having a poor credit score doesn’t always mean you’ve defaulted on payments and can, in many cases, especially for younger buyers, mean they’ve simply not built up any form of credit history to be considered against or even that they’re not on the electoral roll! As such, here’s our top 5 tips for boosting your credit score ahead of a mortgage application.
1. Check Your Current Credit Score & Report
How can you even begin to boost your credit score if you don’t know where it’s at at the moment? The very best starting point for any individual or couple considering applying for a mortgage and even slightly concerned about their credit score is to request a copy of their current credit report from the likes of Experian or Equifax, both of whom offer a free service.
Once you know your score, you can put in the effort to do something about it if it’s less than adequate. At the end of the day, if you’re seeing what lenders are seeing on your credit report, you can take the steps to ensure you rectify any issues and build up a history of credit if your report is lacking.
2. Register To Vote
One of the common things which young people ‘forget’ to do is register to vote and get themselves on the electoral roll. Lenders use this as a fraud prevention technique to double check that you really do live where you say you live. It only takes a few moments to register to vote if you’re not already on the electoral roll and it can make a big difference to your overall credit score. You can sign up online at About My Vote.
3. Ensure You Don’t Miss Payments
Missed or late payments are one of the worst things for bringing down your credit score, whilst making payments in full and on time are one of the best ways to take it up! To lenders, missed or even late payments suggests you’re unable to manage your personal finances efficiently and, as such, can use this as a bad mark against you. The best way to demonstrate your ability to manage your money is by making payments on time and by sticking to your credit limit. If for some reason you need to go over your agreed credit limit (perhaps for a large purchase), talk to your bank or credit card provider as in many instances, they’ll negotiate your limit. It’s far better to pre-arrange a larger limit than to go exceed your current one.
If at all possible, make larger than the minimum repayments, further showcasing that you’re able to not only meet but exceed these and manage your money efficiently to pay debts off ahead of time. Missed or late payments will generally stay on your credit report for at least six years, however if there’s a specific reason for poor money management (perhaps you were ill or going through a divorce, as an example), you can request that a ‘Notice Of Correction’ is added.
4. If You’ve No Credit History, Apply For Some
For many young people, the problems lie in the fact that they’ve never had credit to build up a history. If you’ve never had a credit card, get one! Despite the fact that you’ll likely only be approved for a small limit, it doesn’t matter. Simply buy small items on the credit card and pay off by the end of the month. It’s demonstrating that you’re able to manage your money by borrowing on a credit card and paying off in full. Don’t be tempted to apply for too many cards at once, however as this can have a negative effect. You simply need to demonstrate that, over time, you’re able to borrow and repay.
5. Close Unused Credit Accounts
On the other hand, some people will find they’ve got a number of credit cards or credit accounts which they no longer use. If this is you, close those which you don’t need. Even if you’re not using cards, some lenders will look at the maximum amount of credit available to you at any one time. As such, unused cards can negatively affect your overall attractiveness to lenders. It’s always important to keep a few credit accounts open to showcase your money management, however if you’ve not used a card in a good few months, get it closed down!
All in all, in many instances, improving your credit score is simply common sense. By following a few simple tips and guidelines, over time you can significantly increase your overall credit score and if you keep monitoring through credit reports, you’ll see this for yourself and have the confidence to apply for a mortgage and become the owner of your own home!