If you’re currently in the market for a mortgage, a quick Google search will come up with a number of tips on what to do before you apply. You’ll no doubt keep reading that your credit score will play a big part in whether or not your mortgage application will be accepted.
Whilst some lenders may be more lenient than others you can be certain that if you have any missed credit card payments, this will dent your credit score and could affect your chances of getting a mortgage.
How do missed or late payments affect your mortgage application?
If you miss a credit card payment, or a payment on any other form of credit it will stay on your file for six years. This is regardless of how soon you catch up and pay off the debt.
When you apply for your mortgage, the lender will want to see your credit file. This gives them an insight into how you have managed your finances in the past. This enables them to judge how likely you are to keep up with your mortgage payments. If your credit history paints a picture of a good, reliable borrower, the chances of being accepted for a mortgage are pretty high.
Having a number of purchases on credit, such as credit cards, mobile phones or even car finance won’t stop you from getting a mortgage. However if you have missed any payments, or been late making a repayment then this is a different matter.
For every payment that is late or missed, you will receive a mark on your credit file. The more marks you have the higher risk you pose to the lender. So if you have missed one payment and then paid it a couple of weeks later when you remembered do not panic. Lenders are aware that sometimes simple mistakes can happen. However, if missed or late payments seemingly become a habit, alarm bells will start to ring with the lender.
How can I improve my chances of getting a mortgage if my credit rating has been damaged?
Having a perfect credit score is the ideal position to be in when applying for a mortgage. However if you believe you’ve damaged your rating with missed credit payments you can do things to improve your chances.
The first thing to do is to try and find a way to pay off your debts. You’ll need to pay regularly and on time. If you don’t have any current debt but your credit score is affected by past mistakes, you may want to consider taking out a small amount of credit before you go for the full-on mortgage application.
Credit Builder cards are available to those with a poor credit rating. Be careful as the interest rates can be quite high. However, if you can prove to be reliable by taking out a small amount of credit then paying it back regularly and on time, you could see improvements to your credit rating in as little as 6-12 months.
If you have reached the mortgage application stage, then you’d be wise to try and lesser the risk to the lender. One of the ways that you can do this is by offering a large deposit. The larger the deposit, the smaller the mortgage, giving less risk to the lender. With a reduced risk to themselves they are more likely to consider your mortgage application in a positive light.
Before applying for your mortgage
You can save yourself time and hassle before you submit a mortgage application by checking your credit report. There are a number of agencies which will allow you to do this. You’ll have to pay for a more detailed report but you should be able to make a basic check for free.
If you are unsure of how your situation may affect your mortgage application, it may be wise to seek the services of a mortgage broker. They will help you to find the best deal for your circumstances.
If you have issues with credit, such as missed payments, they will be able to narrow down the lenders that are likely to accept your mortgage application. If you apply on your own and keep getting rejected by lenders , this could further damage your credit rating so having someone on your side to take you through the application process can be a great help.
The above post does not constitute advice – financial, legal or otherwise. The information within this article is the author’s own opinion and do not necessarily reflect the views of SO Media or So Smart Money.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.