Checked by Connor Fitzgerald, Founding Director
When you’re looking to take out a mortgage, one of the first things you’ll likely worry about is your credit score. Many may have heard that their credit score can affect your ability to take out a loan, but when it comes to trying to improve the score itself, things become a lot more confusing very quickly.
There’s a huge amount of information out there, and not all of it is going to be useful or relevant to your situation. To help, our Yeovil mortgage advisors have listed our five most important tips for improving your credit score in this article.
To start with, it’s important to confirm definitively whether your credit score will significantly affect your ability to acquire a mortgage and if so, why? This is something customers often ask of our Yeovil mortgage advisors, so it’s best to state this clearly.
The answer is yes, your credit score can affect your mortgage application. Mortgage lenders will use your credit report to determine how reliable you have been in the past at paying back debts and making repayments. This information gives them a view of your financial situation and how likely you are to be a safe recipient of a loan.
Not only can this information be used in deciding whether or not to provide you with a loan, it may also impact your mortgage interest rate. Special rates or offers with some lenders may only be available to those whose credit history meets the criteria.
While this may be something many of our mortgage customers already know, for those unfamiliar with the mortgage process such as first time buyers, it’s important to know where you can go to check your credit score.
There are a number of websites online that you can use to check your credit score. The three primary credit reference agencies in the UK and the ones recommended by our Yeovil mortgage advisors are: Experian, TransUnion and Equifax. Each of these agencies use a different scoring system, however, the differences are fairly minor, so receiving a score from one should give you a good idea of how you might score with the others; and broadly speaking, the higher the score the better. At present, all three of these will require you to register for a 30-day free trial of their subscription service, but this is a simple process and won’t cost you anything as long as you remember to cancel within the free trial period.
When you’re looking to take out a mortgage with our Yeovil mortgage advisors, or with a financial service anywhere in the UK, it’s often a good idea to check your credit score as a first step.
Before we dive into our Yeovil mortgage advisors’ top tips for improving your credit score, it’s important to understand exactly what determines your credit score in the first place. While there may be some small variance in the factors and significance placed on them between each agency, these are the primary elements that make up your credit score:
After seeing how important your credit score can be for a mortgage application, whether it’s for a first time buyer mortgage or a buy to let loan, you may be all the more eager to learn what you can do to boost your score. Here are the five things our mortgage advisors in Yeovil recommend you do if you find you need to improve your credit score:
The first instinct may be to panic when you find your credit score is lower than you were hoping, but it’s important to keep a clear head and read the full report in detail. Even a small mistake in a key area can have a big impact on your score, but on the other hand getting it straightened out should mean it recovers promptly.
This can include large issues such as lending in your name that wasn’t you, or simply a typo in your information. Due to the risk of the former case, it’s very important that you read your credit report closely, even if you’re happy with your current score.
This may not be a feasible option for everyone, and is not always an easy process, but if you have joint accounts or loans with someone who has a poor credit rating then this can also negatively affect your own. If you sever these financial associations then you should see your credit score rise. This is rarely an easy conversation to have, but can make all the difference in securing a mortgage loan that’s right for you.
Having the correct address on your credit report is very important, and so you should look to update this as soon as possible if you move. One good way to ensure that credit agencies always have up to date information is to register to vote at your new address. Councils will send data on voters to credit reference agencies every month, so if your lower score is due to an incorrect address this could improve matters within one to two months.
Visit Gov.uk to register to vote in your area.
Again, this may not be something everyone can do, but there isn’t any better indication to lenders that you’re in control of your finances than with timely repayments on your existing loans. It’s worth noting that not all bill payments will be factored into your credit score, so if you are struggling, it’s a good idea to check your credit report to see which payments you may need to prioritise.
If you are concerned you will struggle to meet any ongoing repayments, then it’s important to contact your provider as soon as you can. If your worry arises from the possibility of being unable to work due to accident or sickness, then insurance products such as income protection insurance, mortgage payment protection or critical illness cover can give you a safety net in these situations.
This must be prefaced with the warning that we are not suggesting that you make payments you cannot afford or you are unsure whether you’ll be able to pay back. However, if you are looking to boost your credit score and have the ability to do so, making small, regular payments with your credit card and paying them off promptly can be a good way to improve your credit score.
If you have multiple credit cards that you are not using, then it is recommended that you close the rest and keep only one open for emergencies. However, it must be stressed that your limits or missing repayments on your credit card will have the opposite effect, so only use this method if you’re confident you’ll be able to do so properly.
At The Levels Financial, our mortgage advisors in Yeovil truly care about finding you the right mortgage product for your situation. If you are looking to take out a mortgage, contact us on 01458 772 040 or by email at admin@thelevelsfinancial.co.uk to arrange a free, no-obligation consultation.
Together, we’ll be able to get a clear picture of your financial circumstances in order to provide you with the right guidance throughout the mortgage process. We look forward to hearing from you soon!
Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances.
The fee is up to 1%, but a typical fee is 0.3% of the amount borrowed.
