Experian expert, Joe Green, answers your credit-related questions
Buying after divorce
I was married, but the home we lived in was in my husband’s name only and all the bills were in his name too, although I contributed to paying both the mortgage and the bills. We have recently divorced and I want to buy my own flat now, so I will be a first time buyer. My husband never really shared information about our financial situation but, as far as I know, we were never in debt. I have seen a place I really like and now need to get a mortgage. Before I begin, what do you think I need to do? I think I can get a credit check and will this detail any problems that might have arisen from when I was married?
Being in a personal relationship with someone does not link up your credit reports, but people can be linked by joint financial activity. As you haven’t applied for a mortgage together, or put your name on any of the household bills, these accounts will not appear on your credit report. Regardless of whether your ex-husband has a poor financial history, this will have no impact on you at all as lenders will only check your credit report, not your ex-husband’s.
For peace of mind, it might be worth reviewing your credit report with all three credit reference agencies to double check you’re not financially linked with each other. Checking your credit report will also give you an opportunity to see whether you need to do any work to improve the picture your credit history is painting of your credit worthiness. Taking the time now to understand, manage and improve your credit report could not only impact getting accepted for a mortgage, but also the rates you are likely to pay, and could save you a lot of money in the long term.
I am 27 and recently my aunt left me some money in her Will. This is quite a sizeable amount and my girlfriend has suggested that I invest it in property and buy my first home. The trouble is that, although the money that has been left to me will cover the deposit, I am not sure I will get a mortgage. I did get into debt some years ago, when I was a student, but that has been sorted now. I currently live at home with my parents, but I am not sure what I have to do to make sure I am able to buy. There is no point in saving this money for too long as interest rates are so low, so I would like to get on to the property ladder as soon as possible. Can you help me, please?
Spending some time now on understanding how lenders might view your credit worthiness and how you can improve the picture your credit report paints of your financial situation can really pay dividends, not only in getting approved for a mortgage, but in getting the best rates. Using credit and having debt in the past is not a concern for lenders; they are more concerned with how you repaid any money lent to you.
If, in the last six years, you had periods where you were late, or missed agreed credit repayments, this will affect how a lender views you now, but it is your most recent behavior that is the most important in relation to late/missed payments. Defaulted accounts are especially concerning for mortgage lenders and they will continue to have a significantly negative impact on your Experian Credit Score for six years from the date they are settled.
The best starting point is understanding your current position and then you can start taking some steps to ensure your credit report is in the best shape possible to support your application. I think you might find it useful to check out our Experian Guide to Mortgage Applications, which can be found on Experian.co.uk/Improve.
No credit history
I am originally from Poland and I have lived and worked in the UK for several years. I live in a small rented room and have two jobs, so that I can save up to buy a home of my own. I think I have saved nearly enough to put down a deposit, but I understand that I might not get a mortgage, as I have no credit history. I do not have any credit cards and I am not on the electoral roll, which I understand is very important. Although I have never been in any debt, I am concerned that it will be a problem when the time comes for me to apply for a mortgage. What do you recommend I do?
Before lending money to you, lenders will be looking for evidence that you are who you say you are, that you going to repay any money lent to you as agreed with the lender and that you can afford any repayments, both now and in the future. Not having any history of repaying credit that has been lent to you in the past can be a significant cause for concern, as the amount of money you would be hoping to borrow is so large.
Your first step should be to check your own credit report, to see what accounts are registered there. You might not realise that services such as mobile phone contracts, some utility bills and even your overdraft all count as credit, so you might have more positive information than you think. If you do find that your credit report has very little information, you do have a number of options that may help improve the picture it paints. Registering on the electoral role is important for verifying your identity. Consider if you might benefit from taking out a credit builder credit card – using a little every month and repaying in full, without fail, each month. Before long, you will start building up a picture of positive credit management that will better support a mortgage application. This could help you to not only get approved, but get the best deals you are eligible for.
If you want help understanding how credit referencing works and how to improve your Experian credit score, visit experian.co.uk/improve