To Qualify For a Mortgage, Improve Your Credit Score
Not only does your credit score impact whether your mortgage application is approved, but it also affects the amount of your monthly payment. You must raise your credit score before you apply for a mortgage.
It is one of the best ways to prepare for a mortgage application. However, improving your credit score takes time so be patient.
How credit ratings work
Three major credit reference agencies exist in the United Kingdom. They all use your financial information to create a picture about how you manage credit. Your credit score is the summation of all this information. Your credit score can have a significant impact on whether you are eligible for a mobile phone contract or how much interest you pay on your credit cards. It could also affect your ability to purchase a house.
The lender will request credit reference companies to review your financial history when you apply for a mortgage. Good credit scores increase your chances of getting mortgage approval. However, bad credit can result in rejection or higher mortgage rates.
11 credit-rating-improvement recommendations:
1. Check your credit report
You can only truly understand your credit report if you see it. Any of the three credit reporting agencies (Experian Equifax, TransUnion and Equifax) may give you a copy.
Credit checks are not recorded and you and the credit reference agency can see them. There are no negative consequences to checking your credit. Keep checking in regularly, especially before you apply for large amounts of credit.
The checks can be done online and are fast and easy to complete. They are also completely free.
Your rating with each agency is a great place for you to begin your growth.
2. Verify the accuracy
It is important to ensure that your credit reports are accurate and current. Verify that your credit cards and accounts are listed. Also, check for any missed payments and other issues. You must notify the credit reporting agency if you suspect any of these details to be incorrect.
Although it may take some time to add missing accounts and correct missed payments, this is crucial. For example, a six-year old unpaid phone bill could have a significant impact on your mortgage rates. So make sure to thoroughly analyse it.
3. Examine any financial relationships with other people
Many people don’t realise that joint accounts with other people can affect your credit score. Make sure you’re not financially tied to someone you shouldn’t be. Ask for the deletion of any outdated links.
Although ex-partners are the most obvious financial link, renters often have pooled accounts that handle household expenses.
4. Register to vote
Registering to vote will improve your credit score. The process is easy and can be completed online in just a few minutes. Experian says that lenders will be more inclined to consider it a positive sign when you apply to credit. This is because it allows them to quickly verify your identity. This is considered a sign that you are secure.
Experian estimates that having a voting record at the current residence could increase your credit score 50 points. Only 45 percent of people know that voting on the electoral roll can have an impact. This could be the difference in a good score and an excellent one for some. This could lead to lower interest rates on loans and credit cards as well as mortgages.
5. Pay your bills via direct debit
A missed payment can result in a blemish on your credit report, and a reduction in your credit score. Avoid this by making sure you pay all your expenses via direct debit.
You should contact your creditor if you are unsure if you can make the payment. They may be able help you set up a repayment plan to prevent a big black mark.
6. Demonstrate your debt-management skills
Your credit score could be very low if you have never borrowed money. This is because you have not proven that you can handle debt responsibly. If this is you, then you should apply to a credit card. Make sure that you pay the entire balance each month.
Over the course of several months, your credit score will gradually increase. It is obvious that your credit score has improved when the bank offers you credit extension.
When applying for your first credit card, be cautious. Although credit cards can have high interest rates that are quite severe, if you repay the card each month in full, you won’t have to pay any interest. Credit card debt can ruin your credit score so don’t borrow more money than you can repay.
7. Reduce your credit use to a minimum
It could be taken as a sign you aren’t managing your money well, or you live beyond your means, if you have a lot of unsecured debt, such as credit cards and overdrafts. You will become less attractive to mortgage prospects as a result.
This can help you improve your credit score. It is important to repay as much debt as possible before you can qualify for a mortgage.
To estimate the amount of deposit you will need, use our online mortgage calculator and best buys.
8. Accounts that are not in use should be deactivated
Your credit score can be improved by closing any unused bank accounts. If you have multiple credit cards, consolidate your debt to one card. Balance transfer credit cards without interest are an option. These cards allow you to transfer debt from interest-bearing to non-interest bearing cards. However, be aware of high transfer fees.
9. When applying for credit, be cautious
The company will examine your credit history before making a decision on whether you are applying for credit. The company will conduct a thorough search of your credit report, and the results will be saved to your file.
You might appear desperate to get credit if you do too many searches in a short time. This could damage your credit score. If possible, avoid applying for credit for more than six months before you plan to apply for a mortgage.
10. Get free credit score tutoring
Clearscore provides free advice on improving your credit score. The app gives you a list with tasks to complete. You may be able finish the coaching within a few days if you’re motivated. However, credit rating impact may take several months.
11. Be patient
It takes time to build credit, save enough money for a deposit and make enough money to pay the monthly mortgage payments and other expenses associated with owning a house. It is important to pay attention to your credit score. This could help you in the long-term.
L&C, the award-winning mortgage broker, can assist you when you are ready to apply for mortgage. You can search for a mortgage online or check out the best deals today. With your new credit score, they will help you find the best mortgage.