DO YOU KNOW YOUR CREDIT RATING?
Your Credit rating is very important to your Mortgage application
If you’re looking to take your first steps onto the housing ladder you may have sacrificed your takeaways and holidays to save the deposit and scoured hundreds of houses online. But have you checked your credit history?
Even if you’re Remortgaging or moving up the housing ladder your credit history will be important in a mortgage lender decides to approve an application or not.
What is a Credit Score?
A credit report includes details of your credit history including any credit you’ve applied for (like loans, credit cards, and overdrafts), credit you’ve been given and how you’ve managed the repayments. Also included are your address details (current and previous), public records such as county court judgments and financial associates (someone who is financially linked to you eg. a joint mortgage or bank account).
All the details in your credit report are analysed to calculate your credit score. This score is used by lenders as an indication of how you’ll manage and repay the money you borrow.
The scores on the doors
The general rule is the higher the score the better, and the more likely you’ll be accepted for a mortgage or other credit.
If you’re looking to take out a mortgage or remortgage, check your credit score regularly. You can usually get a simple overview for free and it pays to check with several different sources. Noddle, ClearScore and Experian all offer a service to help you understand your rating.
According to research from Experian, when the home buyers who were surveyed checked their credit 18% found their score was lower than expected. The good news is that there are ways to improve a low score:
- Pay more than your minimum payments on credit cards
- Bring your overdraft down
- Close unused credit accounts
- Register for the electoral roll
Happily, 54% of those surveyed found their score was higher than expected and 25% were surprised by their score. Given that 43% of people haven’t checked their credit score it may be that many are unaware of the impact it may have until they come to apply for a mortgage.
Your home may be repossessed if you do not keep up repayments on your mortgage.