Top tips for making sure your credit is where it should be
When a lender decides whether to lend you the money you need, they will take into consideration lots of different bits of information about you when making their decision. We know they will look at your income and expenditure, as well the house you are looking to buy, but they will also take a good look at your credit history.
Your credit history is helpful to a lender in their decision making. It helps them understand what finance you have in place and are already committed to paying each month. It will also tell them about how you may have handled loans and credit cards in the past, particularly if you made late, or even missed payments.
You can review your credit score and history online quite easily now. And so, we wanted to give you some information on how you can look after your credit and be in the best position possible to get a great mortgage.
- Register to vote. There are lots of reasons to do this. But when it comes to borrowing money, being registered to vote means the lender can trace your address history a lot more easily. If you aren’t registered, it may be difficult for the lender to find you and could result in them declining the mortgage application.
- Take care when applying for credit. If a lender sees lots of declined credit applications on your credit file, this can reflect poorly on you. It may suggest that you are in financial difficulty and are looking to for help. Multiple declines can also lower your score which can result in the lender declining the application.
- Don’t borrow what you don’t need. If possible, try not to take out loans or credit cards in the six months prior to applying for a mortgage. Multiple credit cards with large limits but no activity may mean you are susceptible to fraud, or a drastic increase in debt after the mortgage completes.
- Debt to Income Ratio. This is how much money you owe, compared to how much money you earn. Typically, it is compared to the amount of money you make in a year. The higher the ratio, the less likely you are to be approved for a mortgage. Lenders want to see that you are not overstretched and that you will still have the money each month to make your mortgage payments.
- Pay bills on time. Your credit card and loan payments may well be up to date, but did you know phone and utility companies also report to credit agencies? One missed payment can have a negative effect on your application. So be sure not to drop the ball, especially in the 12 months before you apply for a mortgage.
- Check, check, check. Check your credit report for inaccuracies. You may be surprised by what you find on there. If you have previously had an association with someone else, be sure to update credit agencies and your financial providers to make sure any changes are up to date. It’s also a good way to make sure you don’t fall victim to fraud.