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If you were about to lend someone a large amount of money then you’d want to know that they are responsible, capable of paying it back and aren’t hiding anything below the surface, right?
That’s why lenders look at credit ratings to help decide whether to a) lend you money b) how much to lend you, and sometimes c) how much interest to charge.
Given this, there are a number of ways to prove you are a trustworthy individual who can manage your finances responsibly and are able to pay back what you borrow. If you can clearly prove that you have a good credit score, then you’ll stand a better chance of getting the mortgage deal you want and ultimately will be able to borrow the maximum amount to help you buy the house of your dreams.
The first place to start is to find out how good or bad your credit score is. There are various companies out there i.e. Experian, Equifax, Equifax, TransUnion and Callcredit, who can give you your credit score. This will be a thorough report of all your credit accounts, including outstanding loans and any missed or late payments over the last six years, as well as any other people who are financially linked to you. Review the information for any errors or inaccuracies that could negatively impact your score. If you find any errors, contact the credit reference agency to have them corrected.
Ensure that you are registered on the electoral roll at your current address. Lenders often use this information to verify your identity and address stability.
Start by proving you have a good history when it comes to managing your finances. Having a history of bank accounts e.g. a current account, savings accounts, ISAs, credit card etc. will give your mortgage adviser a decent history of your credit to look back through. Lenders value stability, so avoiding frequent changes in your address, job, or bank accounts can have a positive impact on your credit score. Stability demonstrates reliability and reduces the perceived risk for lenders.
Lenders will need to see proof of your name and address in order to trust you are who you say you are. Register on the electoral roll and make sure all of your bills are registered to your current address. This way, everything is easy to trace back to you and confirms your identity.
Pay your bills and credit obligations on time. Late or missed payments can significantly impact your credit score. Set up direct debits or automated payments to ensure you never miss a payment.
If you have existing credit accounts, such as credit cards or loans, make sure to manage them responsibly. Keep your credit utilization ratio (the amount of credit you’re using compared to your total available credit) low—ideally below 30%. Paying more than the minimum payment due each month can also help demonstrate responsible credit behaviour.
When you apply for new credit, it typically leaves a hard inquiry on your credit report, which can temporarily lower your score. Avoid making multiple credit applications within a short period as it may appear risky to lenders. Instead, research and apply for credit options you’re confident about and that suit your needs.
If you have little to no credit history, it can be challenging to obtain credit. Consider starting with a credit-builder credit card or a small loan from a responsible lender to establish a positive credit history. Make timely payments and keep the utilization low to gradually improve your score.
Remember, improving your credit score takes time, and there are no quick fixes. Consistently practising responsible financial habits and demonstrating good credit behaviour over time will help you build a stronger credit profile.
If you’d like to find out more about improving your credit score, talk to our team of expert mortgage advisers on 08454 500200 or click here to make an enquiry.
Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances.
The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.
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