The higher your credit score the more chance you have of your mortgage application will be accepted. No one is guaranteed to be accepted though, lenders have their own internal scoring systems.
Each lender has developed their own system of scoring over the years. Don’t worry if you fail with one lender. There are other mortgage lenders who may be more forgiving.
It is your mortgage advisor’s job to match you to the right lender, hopefully the first time. As a first time buyer, both you and your mortgage advisor want the same thing which is that you end up with the best deal available to you.
There are several different credit reference agencies in the UK, including Experian and Equifax. It is a good idea to check as many of these agencies as possible to get a rounded picture of your credit score.
Also, it is possible that one of the agencies may be holding incorrect data. Checking with several agencies will help you identify any such discrepancies.
There are some good first time buyer mortgage advice listed below in regard to things you can be doing to improve your credit rating:
Multiple credit searches can have an adverse effect on your score. Be careful when using price comparison websites who are major culprits of credit searching on individuals.
If you know you want to apply for a mortgage soon it is wise to avoid applying for any other credit. Whilst having some credit and paying it back is a good thing for your score in the long run, lenders do not like to see you increasing your borrowings just prior to making a mortgage application.
Being on the electoral roll adds a lot of points onto your score. It indicates stability and lenders like that.
Ensure your name is spelt correctly and that it’s your current address you are registered at, not an old one. If you are not registered it’s easy to do so online.
If you max out your card each month that will reduce your score. Using a credit card and paying off the balance in full each month is preferable.
This indicates that you are good at managing your money. Worst of all would be exceeding an agreed card limit or overdraft. lenders want to know that you take your finances seriously.
Quite often it can appear that you are living in two places at the same time on your credit report. This occurs because you may have forgotten to tell one of your credit providers that you have moved to a new house.
Check all addresses are spelt correctly. If you have lived in a flat this can be tricky as the flat/apartment number can be formatted in different ways.
You should contact the providers of store/credit cards you no longer use and get the account closed. In the short term this can have a negative effect on your score briefly as the credit reference can’t really tell if it’s you closing the account down or the provider.
Don’t worry though, it’s one step back to take two forward. This is also a good thing to do to reduce your chance of falling victim for fraud should you not notice you have lost a card you don’t use regularly.
If you have a family member or ex-partner connected to you then this could be affecting your score. You won’t be able to get the financial association removed if the account is still live though. To remove one of these links you should contact the credit reference agencies and make a request.
Many consumers feel credit scoring is an unfair way of lenders assessing applications. lenders feel differently. It is much cheaper for them to operate this way and computers give more consistent outcomes.
Send an up to date copy of your credit report to your mortgage advisor up front and you will increase your chances of being accepted first time. The more your advisor knows about your finances the better.
Also, there are still some smaller lenders out there that do not credit score. These lenders do it the old-fashioned manual way, although they will still have certain rules about the number of defaults and CCJ’s they will allow.