With the average age of a first time buyer creeping up to 32, it can come as a shock to stumble at the final hurdle when you get credit checked by your bank.
During your mortgage application your mortgage lender completes a credit score on you. They use your credit rating to assess your current and historical lending records to confirm whether you are a high or low risk borrower.
A bad credit rating can be caused by a number of different reasons and these include:
- Not registered to vote on the electoral role
- Multiple current addresses listed under your name
- Defaults (missed payments) on loans, hire purchase agreements or overdrafts
- Too much or not enough available credit
You can find out your credit score through many different free services such as Experian or Equifax. Although these are free, you can pay and get a more in-depth assessment which will help you target and addresses issues within your credit report.
If you get turned down based on a low credit score by a mortgage lender during a mortgage application then read on to find out what you should do.
1. Register to vote
Registering to vote is very important as it provides your name, address, National Insurance number and other important information that confirm who you are. For a mortgage lender this means they can confirm you are registered and living at the address that appears on your credit report.
2. Stay living in one place for more than 6 months
Much like with your registration to vote, a mortgage lender prefers to see you resident in one location for a long period of time. If you move around a lot there is a risk that bad credit may take longer to get registered against your name and logged on your credit report.
Your credit report lists all of the known residential addresses for you so run through each one and make sure that your current address is listed along with your full name.
3. Keep up repayments on all debt
Missing debt repayments has one of the greatest negative impacts on your credit score as it is a reflection of your inability to manage your finances. The good news though is that if you have missed any repayments, you can make up for this by continuing to make repayments from this point onwards. Time is the greatest healer and the longer you prove that you can manage repaying your debts, the better.
If there is an exceptional reason for missing the payment then you should speak to the company and ask for them to make a note of the reason for missing the payment on your credit file.
4. Too much available credit? Close down some credit cards
Although it is good to have a credit to prove you can manage your finances, it can be a negative if you have too much available credit, even if you aren’t using it. You may not even be aware of some of the credit limits you have as credit card companies often increase the limit you can spend without you requesting it.
The best advice is to use your credit report to close down credit cards that you aren’t using so that you are left with just the credit cards you are actively using.
If you are worried about your credit score, the best advice is to use your credit report to address any issues that are contained within it. Over time your credit score can improve as long as you keep updating the information held for you and continue satisfying your debt commitments.
Andrew Boast MAAT MIC Co-founder of SAM Conveyancing
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