Credit conditions are undeniably tight but the probability of very low interest rates for the foreseeable future, combined with the increasing costs of renting, makes home ownership comparatively affordable for many. The hurdle to get over is being accepted for a mortgage.
If you haven’t got as far as putting in an application yet, these tips could help to get you the score you need.
1. Understand how lenders calculate credit scores
They take information from the personal history of your credit accounts contained in your credit report, plus details from your application and give relevant items a value, using their own unique formula. Different lenders give different credit scores. Because lenders have different past experiences and expectations, they take different factors into consideration and score things differently. And the same lender may score a mortgage application differently to a credit card.
2. Make sure your credit report is accurate
Go through it carefully, looking for discrepancies such as different ways of listing your address, and clerical errors, such as duplicate listing of accounts or closed accounts marked as open. Make sure everything is accurate and up to date and query with lenders anything that isn’t. Don’t have access? Get your credit report score now.
3. Don’t use a scattergun approach
Applying to every lender you can find could actually harm your chances – avoid making several close together as this can signal financial stress. Each application is recorded on your credit report and if lenders see lots in a short period, they could think that you’re desperate or suspect a fraud. Experian CreditExpert can help match you to credit products that suit your financial status and credit rating.
4. Make yourself more attractive
Simple steps could add valuable points to your credit score and make you more attractive to mortgage lenders. Registering to vote at your current address, close any unused accounts or add a “notice of correction” (up to 200 words) explaining if special circumstances, such as illness, caused past problems. Also, review financial links to other people and ask for any outdated links (e.g. to an ex-partner) to be broken.
5. Pay on time, every time
Lenders look for proof that you’re a reliable and responsible borrower and late or missed repayments stay on your credit report for at least six years. Try to stay within the agreed credit limits, and always make your repayments on time, paying more than the minimum off your credit cards each month if you can.
6. Be patient
There’s a reason why the average age of a first time buyer is 37 – it takes time to build a good credit history, save a sufficiently large deposit and earn enough to take on repayments and running costs. It’s worth knowing your credit status – as it may well pay off in the long run.