Improve your credit score and secure that mortgage
When applying for a mortgage your credit score is something that will be scrutinised by mortgage lenders.
They’ll want to take a deep dive into your financial past and see how you’ve managed your money over a period of time, and who can blame them, homebuyers are asking to lend substantial sums of money from them.
Before you’ve even got to the stage of applying for a mortgage you should’ve already researched your own credit rating to give you an idea of how financially healthy - or unhealthy - you look behind the scenes. After all, there’s little point in applying to borrow tens or hundreds of thousands of pounds if your credit rating doesn’t make for pretty reading.
So, if you’re someone who has a bad credit score, what can you do to improve it?
Luckily, there’s plenty of things you can do to improve your credit score and make yourself a more capable borrower in the eyes of lenders.
What can I do to improve my credit score before applying for a mortgage?
The most important thing to remember when it comes to your credit score is to always keep on top of your credit payments. If you miss credit card payments or utility bills, it will find its way onto your credit score and is likely to lower it considerably.
Besides ensuring you regularly make payments on time, there are other things you can do to improve your credit score to increase your chances of receiving a mortgage offer.
This includes:
Get yourself on the electoral register (if you’re not already on it)
Something as simple as enrolling yourself onto the electoral register can give your credit score a boost. Equifax say that this is because lenders and contract providers can easily check that you are who you say you are and helps avoid problems related to fraud and identity theft.
It’s easy to sign up on the UK Government website and takes just a few minutes to do, and if you unsure whether you’re already registered or eligible you can check that out on the About My Vote website.
Avoid applying for credit several months before a mortgage application
Every time you apply for credit a lender will search your credit file – this includes applications for a loan, overdraft, credit card, and even mobile phone contracts. If you have an influx of searches in a fairly short space of time this could have a negative impact on your credit score and in turn, make it more difficult to obtain a mortgage. This is because lenders may view you as somebody who needs to borrow for potentially the wrong reasons, or for too many reasons. So, the best thing you can do is avoid seeking credit in the 6 months or so prior to applying for a mortgage so that no questions can be raised about why you’re so in need of credit all the time!
Find out your credit limits and stay within them
We all have limits that credit reporting companies recommend we stick to. This means not spending too much but can also mean not spending too little - it’s best to have a manageable amount of credit that you repay regularly and always on time.
According to ClearScore, it’s beneficial to use some of your credit limit, but no more than 30% of it. Using 30% or less can indicate to lenders that you can comfortably repay the balance, are aware of your credit limits and have control over your expenditure. Controlling your credit limit usage and keeping it low can help improve your credit score.
What credit score do you need to get a mortgage?
There are no hard and fast rules as to what credit score you need to achieve to successfully obtain a mortgage offer as what is acceptable can vary between lenders. What’s more, there’s more to it than simply having a good credit score - that’s just one of the main factors among many others that lenders will take into account.
However, it does still matter because if you have a poor credit score then you are naturally going to be turned away by far more lenders than someone who has a great credit score.
In short, the higher your credit score the greater your chances will be of securing a good mortgage offer.
What is a good credit score?
Using the popular Experian Credit Score system as an example, your credit rating will be rated between 0 - 999 as follows:
0-560 - Very Poor
561-720 - Poor
721-880 - Fair
881-960 - Good
961-999 - Excellent
So, using the Experian Credit Score rating, you’d need a score of 881-960 for your credit score to be good, but why stop there? Aim for excellent!
Here at CPS Homes, we’re ready to help you along your home buying journey from start to finish, so why not discuss your situation with our highly experienced and knowledgeable sales team? Simply give us a call on 02920 668585, e-mail enquiries@cpshomes.co.uk or pop into one of our three Cardiff branches.
The information contained within this article was correct at the date of publishing and is not guaranteed to remain correct in the present day.
