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How to improve your credit score before a mortgage application?

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If you plan to buy a new home or remortgage within the next year or so, it may be wise to take steps now in order to clean up your credit score.  This could increase your chances of being accepted for a mortgage and could even help to reduce the amount of interest you’ll pay on the loan.

Why is it important to have a good credit score? 

When lenders decide whether or not you’re the type of person they want to do business with, they’ll typically start by reviewing your credit history.  Lenders use this information to check if you are likely to be a responsible and reliable borrower i.e by making sure you’ve been sensible with borrowing in the past.  As a mortgage is likely to be your biggest financial commitment for years to come, you’ll want to give yourself the best chance of getting a good deal.  It’s certainly a good idea to make sure your credit score is as high as it can be, or if not, see where improvements can be made to increase it.  

How to check your credit score

You can apply to one of the credit reference agencies (such as Experian or Equifax) for a copy of your report.   This will show you where your credit score currently stands.  Take your time to review the report to make sure that the information it shows is accurate.  

If you are worried that there are credit accounts that shouldn’t be there this could indicate criminal activity has taken place i.e identity fraud – if this is the case you can report this to the credit reference agency and open up a dispute case.  

If your report shows that you have late or missed payments, you cannot ask this to be removed.   You are only allowed to remove/amend information that is incorrect.  

What can you do to improve your credit score?

If you find yourself in a position where you need to improve your credit score, there are a few things you can do:

Stop applying for new credit

Each time you apply for a new credit product, whether it be a loan, credit card or even car insurance if you pay by monthly direct debit) it will add a ‘footprint’ to your file.  Applying for lots of credit in a small space of time could trigger a rejection by a lender as to them, it looks like you are desperate for credit.  If these are necessary applications, try to space them out as much as possible. 

Reduce your current debt 

If you have a significant amount of debt on credit cards, loans or overdrafts, try and pay these off as quickly as you can.  Why would a mortgage lender want to lend money to someone who already has a large amount of debt?   

If you are concentrating on saving, consider whether some of this money may be better going to pay off some of your debts.  After all, you may have enough money for a deposit, but with debt dragging down your credit score it may still prove challenging to get that mortgage in the first place.

Focus on paying bills on time

Lenders will want to see that you can be responsible with credit so paying off credit cards in full each month is a good way to keep your credit score healthy.   The same with all other bills.  Late or missed payments, especially if in the last 12 months prior to your mortgage application, will show up as a red flag to a lender. 

If timely payments are a challenge to remember, try setting up a direct debit or add a reminder to your phone a couple of days before your bills are due. 

It’s not just about the money – lenders need to know who you are

Have a perfect credit score but struggling to get accepted for a mortgage?  Think about other things that could be affecting your application.  

If you are not registered to vote, then this could affect your ability to apply for credit.  It sounds simple, but it’s one of the most common mistakes that people make.  It’s used by lenders to check identity.  Not only do they want to see your financial history, they also want to check you are who you say you are. 

Consider using a mortgage broker

If your credit score is affecting your ability to get a mortgage, then it may be worth seeking the services of a mortgage broker.   It’s not impossible to get a mortgage if you have a poor credit score, however it’s not always easy to find the right one on your own.  Mortgage brokers work with multiple lenders and will be familiar with their lending criteria.  They can target specific lenders/mortgage products and help to match you to a loan that suits your needs.

Looking for a mortgage with a less than perfect credit score?  Speak to a So Smart Money mortgage expert today to help you with your mortgage application.  

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