A good credit score is a must if you want to qualify for a mortgage, but there is plenty you can do to make sure yours is as high as possible before applying.
The trick is to make yourself seem as attractive as possible to lenders, and as one of the UK’s leading mortgage brokers, we’ve put together these simple tips to give you the best possible chance of being approved.
Stay one step ahead of the lenders
One way of showing the financial discipline needed to get that mortgage is to check your credit score before your lender does.
Your credit file will show all your credit cards, loans, overdrafts, mobile phone contracts and more for the last six years, and best of all, you can check it all for free.
Credit rating agencies such as Equifax and Credit Expert usually charge up to £180 a year for their credit monitoring services, however to get around this you can sign up for a free trial, view your credit report and then cancel before any charge is made.
Alternatively, Clearscore offer a free credit score check with no card or bank account details required!
While the report you see may not the same as the one your lender will use it will still show you how well you’ve been managing your credit, and show you how you can improve it.
Just make sure you cancel as soon as possible to make sure you don’t end up paying!
Tidy up some of your old accounts
When applying for a mortgage, longer and more stable credit relationships are key, so its important to tidy up and close any inactive accounts you may have open with small balances.
Another top reason to close your old accounts is that they may prove a fraud risk, and it’s one less place you need to change your address if you do move house (another factor that can impact on your credit score).
Although, it is worth leaving some old debts on your credit report, as long as they were all paid off as agreed as it shows a good history of debt management.
Don’t apply for credit just before a mortgage
Lenders will search your credit history every time you apply for any type of credit or even a mobile phone or utility contract, even if you don’t actually take if out, and multiple searches in a short period can make lenders think you’re desperate to borrow.
For this reason its best to avoid applying for any type of credit for between three and six months before seeking a mortgage.
Of course if you genuinely need to apply for credit, the odd application will be ok, although steer clear of payday loans, as they’re sure to set alarm bells ringing for the lenders!
Manage your existing credit
One of the most important factors affecting your credit score is the difference between how much credit you have available, and how much you actually use.
It can be difficult to strike a successful credit balance, but keeping your debts under 50% of your total available credit is a must, and staying under 30% will help you even further in securing a mortgage.
Paying more than the minimum payments on your credit cards will not only help with this, but will save you money and show lenders you’re serious about securing that mortgage.
Pay your bills on time
Finally, it might seem like an obvious one, but its crucial that pay all of your bills on time, as any missed payments will show up on your report for the next six years.
At the time, a months missed bill may not seem like the biggest problem, but it could end up costing you when it comes to securing a mortgage!
The easiest way to make sure all you’re up to speed on all your outgoings is to set up direct debts so that all your payments are completed automatically each month.
If you’re confident you’ve followed these tips and improved your credit score as much as possible, you can visit our site to take the next step toward securing your dream home, whether a first time buyer, home mover, or even if you’re remortgaging.