Your credit score is one of the most important elements to look at before obtaining a mortgage.
Check My File will check against the 3 major agencies that the lenders use so this is a great place to start, should you wish to review your file now.
(free for 30 days. £14.99pm after. Cancel at anytime).
Below I discuss 8 things you can do to improve this, ensuring you are ready for a successful mortgage application.
1. Prove where you live - Always make sure your address is correctly linked to your credit file. If your address is not correctly linked then mortgage lenders may not be able to see your credit history and therefore decline an application. Register on the electoral roll at your current address – you can do this even if you’re in shared accommodation or living at home with your parents. If you can not go on the voters roll, make sure that all records of current credit commitments (utilities, mobile phone etc) is correctly registered across all credit agencies.
2. Regularly check your credit file - There's nothing worse in the early stages of the mortgage process than putting exciting plans in place to only receive disappointing news. Check your file on a regular basis for any errors. For example, check the address is correct, that there are no wrongly listed missed payments and that your address history is correct. CheckMyFile checks against the 3 main agencies so we would advise using them. Click Here to check your file.
3. Make payments on time - It goes without saying but make sure you do not miss credit commitment payments. This includes loan and minimum credit card payments. A missed payment can really damage your score and put lenders off. If you see a missed payment that is incorrect you can raise this with the provider and credit agency to rectify the issue.
4. Keep your credit utilisation low - Your credit utilisation is the percentage you use of your credit limit. For example, if you have a credit card limit of £5,000 and you’ve used £2,500 of that, your credit utilisation is 50%. Usually, a lower percentage will be seen positively by lenders, and will increase your credit score as a result. If possible, try and keep your credit utilisation below 30%.
5. Consider getting a credit builder card - A credit builder card can help rebuild your credit score if it is on the low side. They typically have low spending limits and high interest rates so it is important to spend a small amount each month which you know you can pay back and therefore avoid any interest payments. When you first get a credit card, it might briefly cause your score to drop. But used well, it can help you build your score over time.
6. Avoid moving home a lot - For some this is not possible but lenders like to see stability in your personal circumstances. For example, moving on a regular basis may cause lenders to think you have issues paying rent.
7. Make your rental payments count - If you are renting it is possible to make your rental payments have a positive effect on your credit score. You can self report using sites such as CreditLadder. CreditLadder uses open banking, which allows you to track the rental payments being made each month through your current account - with your permission. If you make your rental payments on time, getting your rent on your credit report is likely to boost your credit score.
8. Assess your financial associations - Anyone that you are deemed to be financially linked to – known as a financial association - will have an effect on your ability to get credit (and vice versa). A financial association is created when you enter a credit agreement with someone else – such as a joint mortgage or current account with an overdraft - and will remain there until you ask to have the association removed.
An association on your report allows potential lenders to search your associate’s file whenever you apply for credit. If they have a good credit history, this could work in your favour, but if they have a history of adverse credit, it could harm your application. This isn’t a problem for most people, but it’s important to remember that a financial association doesn’t end just because a relationship or financial agreement does – so it’s important to check that any link is still applicable.
That's our top tips to monitor and improve your credit score.
If you have any Mortgage related questions, please get in touch.
Thank you.
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