Credit Ratings

Experian Credit Clinic

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Victim of fraud
I’m currently in the process of buying my first home and have been a victim of fraud. I’m worried it will affect my mortgage application as they used my details to apply for several payday loans.  Obviously, my bank has been informed, but I’m concerned that when I apply for credit, my application will be refused.  Do I need to inform other lenders that my ID has been used?
William Goss

It is possible that when fraudulent activity took place, it may have damaged your credit history and could affect the successs of your mortgage application or the deal you’re offered. Informing your bank is a very sensible first step, but you should also obtain copies of your credit reports from each of the three credit reference agencies. This will give you a better idea of the extent of the fraud and what has been recorded by the bank and by your other lenders. If you find any suspicious information on your credit report, then you need to contact one of the credit reference agencies to get this investigated and removed. If you wish to contact Experian, simply call us and our specialist Victims of Fraud team will be happy to help. We will help you go through your credit report to check for other signs of fraud, liaise with any additional lenders affected and, if further fraud is likely, help you add security features to your report to safeguard your details. We will also alert the other two main agencies for you.

In the meantime, it could be wise to hold back on your mortgage application until any credit report issues have been resolved.  An accurate and up-to-date credit report is essential for any mortgage application as you don’t want any unexpected surprises along the way.

Zero-hours contract
I have been on a zero-hours contract for the last eight months, and although I have worked regularly, the amounts I have earned have varied massively.  I’m about to start a full-time job and am looking to buy my first home. My parents have offered to pay the deposit, but I’m worried that my employment history will affect my chance of getting a mortgage. Do you have any advice?
Rosie Netherfield

Congratulations on your full-time employment, you must be very pleased that you’re now getting a regular income to support your mortgage application. It’s handy to know that as part of the lender’s mortgage assessment, they will check your credit report to see your borrowing track record over the past six years, plus other relevant public records such as court judgments and insolvencies. Your income is not part of your credit report, but will be used as part of the overall assessment. Mortgage affordability rules mean lenders are required to ensure you can afford repayments both now, and also if the interest rates were to rise in the future, so your income and outgoings are likely to be reviewed with a fine-tooth comb.

As you have only recently moved to a full-time role, your time working on a zero-hour contract may be taken into consideration as well.  Check with a mortgage adviser, or directly with a lender, to see whether they will require any documentation to prove your income.  It’s worth knowing in advance that you may be asked to provide this.

Spending some time understanding what lenders will be looking for and how you can improve the picture your credit report paints of your financial situation can really pay dividends. You can get your Statutory Report for just £2 on experian.co.uk. This is a one-off credit report that shows your credit history.

Debt management
A few years ago, I found myself in some serious financial difficulties and had to negotiate a solution with my creditors.  I have now paid off everything I owed and have even managed to build up some savings to put towards my first home.  I was wondering, however, if my previous debt management plan will show up on my credit report and affect my application for a mortgage?
Gareth Davies

Well done on clearing off your debts, Gareth. It must be a great feeling having transformed your finances for the better, and being on track to put a deposit down on your first home. Unmanageable debt can have a negative effect on your credit score and could impact your chances of getting a mortgage, so it’s great to hear that you have addressed your financial difficulties.

As you already know, a debt management plan (DMP) is an informal arrangement between a borrower and their creditors to repay outstanding debt.  You might be surprised to learn that DMPs aren’t themselves added to credit reports, instead a DMP flag is added to any accounts that are registered on your report and included in your repayment plan. For many people that have a DMP, regaining control of their finances will be their top priority, so try not to worry too much about your credit score during this time. Once your DMP ends, the associated accounts will either be marked as closed or returned to good order if you keep them open. Furthermore, as time passes, any previous missed payments may be overshadowed by more recent positive information, and after six years, any remaining adverse information should drop off your report altogether.

Should you find that you have adverse credit information on your credit report, you might want to consider adding a Notice of Correction in order to give some background on why it’s there. In this, you could stress that you took responsible action to clear your past debts through a DMP and, if it would help, you could also explain how or why you got into financial difficulty in the first place.

You can check out our Mortgage Application Guide, for more useful tips experian.co.uk/consumer/guides/mortgage-application.html

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