What’s your credit score? How to get and maintain a good one.
The Government’s Help to Buy (HTB) scheme has brought the prospect of home ownership closer for thousands of consumers in the UK. Whether you are planning to use HTB to buy your first home or whether you are planning your next move, encouraged by the competitive pricing now available from a number of mortgage lenders, are you as well-prepared as you could be? Do you know your credit score?
Every lender is looking for customers who represent a good risk – and that means borrowers who are going to make their mortgage repayments in full and on time throughout the term of the loan. Every lender has a different ‘perfect customer’ profile, so a rejection from one isn’t a rejection from all. Each lender will assess you differently and their scoring systems are never published. However, an independent mortgage broker who has had experience of dealing with many lenders will know which lenders are more likely than others to consider your application favourably.
But what can you do yourself to ensure that your credit record is as good as it can be, before you start looking for a mortgage?
- Check your credit files via the credit agencies Equifax, Experian or CallCredit. It won’t cost you more than £2 per agency to look at your files and you should do so regularly, at least yearly. Check every single detail; even a mobile phone contract address that hasn’t been updated after a house move could be a problem for a lender. Check for any products registered to your address that aren’t yours in case of fraud.
- Get all errors on your credit file corrected and check the data is right at the other 2 agencies mentioned above as lenders use a combination of all 3 and won’t tell you which. Write to the lender that is showing an error on your file and ask them to correct it. If it won’t do as you ask, you must write to each agency to add what is known as a ‘notice of correction’. You can also complain to the Financial Ombudsman to get a company to correct errors. You can pay a ‘credit repair’ company to do this on behalf but be careful as they cannot do anything that you cannot do yourself.
There are some simple ways to boost your credit score:
- Register on the electoral roll. This is a key factor in passing the initial identity verification checks. According to Experian, only two-fifths of people (40%) are registered to the electoral roll at their current address.
- Sort out all address errors – even small ones like the postcode. Make sure that all accounts show exactly the same up to date address.
- Put your landline, not your mobile number, on applications and forms. It shows stability of accommodation.
- As well as consistency of address, make sure that your personal information is consistent across all applications.
- Cancel old unused credit cards. They are an unnecessary fraud risk, especially if you no longer get regular statements or check the balance on them any more.
- Try to space out applications for credit cards, loans or any other credit. Too many applications close together does not help your credit rating.
- For each application, think about whether you want a quote or an agreement in principle. A quote will tell you what interest rate you’re likely to get and what your repayments would be but does not require a full credit check. An agreement in principle will tell you if a lender will offer you a certain size of mortgage and is treated as an application and will leave a ‘footprint’ on your credit file. Too many footprints could cause future lenders to be concerned you have been rejected for previous applications.