Your credit score is a key indicator of your financial health and how well you can manage credit. So when it comes to applying for a mortgage, lenders will look at your credit history to understand the level of risk they’d be taking on by lending to you. Boosting your credit score is in your best interests – not only can a high credit score increase your chances of being approved for a mortgage, it can also help you access competitive interest rates. Here’s how you could improve your credit score to get mortgage-ready. 📈
Where can I check my credit score?
Checking your credit score every few months is a great habit to get into, not only to keep an eye on your financial health, but also to spot any fraudulent activity or incorrect personal information that appears on your credit report. The three main credit agencies are Experian, Equifax and TransUnion. You can get a free credit report from all of them, plus tailored guidance on what you can do to improve your score. Checking your own report is considered a ‘soft search’ – you can do this as many times as you like without it affecting your credit score. ✅
What can lenders see when they check my credit report?
Lenders will run a ‘hard search’ when you apply for a mortgage. This leaves a mark on your credit report to show other lenders that you’ve applied for a form of credit and whether you’ve been successful or not. They’ll look out for any late or missed payments (for example, with credit cards or utility bills) but also whether you have any County Court Judgements (CCJs) or a history of bankruptcy. Ultimately, they want to know that you can handle credit responsibly and will be able to keep up with your mortgage repayments.
Can I get a mortgage if I have poor credit?
You might find it harder to be approved for a mortgage if you have a poor credit score, but it’s still possible. However, the lender is likely to offer you a higher interest rate than normal, to compensate for the increased risk to them. If you’re in this situation, it’s best to put down the highest possible deposit you can. A mortgage adviser can also help find the right mortgage for you and offer guidance on your next steps. 🤝
Tips to improve my credit score
- Don’t miss any repayments – While it might sound obvious, the most important thing you can do to improve your score is pay your bills on time every month. Any late or missed payments will leave a lasting mark on your credit history. Getting into a rhythm of paying your bills on time every month will help boost your score.
- Register to vote – You might be surprised to learn that this is one of the quickest ways to improve your credit score. Being on the electoral roll means that lenders have a reliable way to quickly verify your address and identity.
- Check your address – Make sure that your address is the same on all your bank and savings accounts, utility bills and phone providers. This ensures that when you come to apply for a mortgage, lenders can easily confirm your address history. 🏠
- Cut ties with financial links – Your credit score can be negatively impacted by anyone you’ve shared joint finances with in the past. If a former flatmate or partner is dragging you down, you can ask to be de-linked. ✂️
- Build up credit history – but not necessarily with a credit card – Despite what you might think, you can build a credit history without ever having a credit card. Any evidence that you can repay money responsibly – things like a mobile phone contract, contents insurance policy or utility bills, will all help your credit score.
- Review your credit utilisation – Your credit utilisation is how much of your available credit you’re actually using. Having a large credit limit that you don’t use can affect your score. See if you can close any unused credit accounts – your score may drop temporarily, but it will recover.
- Limit the amount of ‘hard’ checks – A hard credit check happens when you apply for a new type of credit, such as a loan or a credit card. Too many of these applications in a short period of time can lower your score, so it’s best to limit new credit applications if you want to see an improvement.
- Give it time – Finally, don’t panic if your score doesn’t instantly jump up after making changes. It can take a month or so for you to see an improvement in your credit score, so keep calm and wait! Before long, you’ll be in a great position to apply for a mortgage.
Your home may be repossessed if you do not keep up repayments on your mortgage.