Applying for a mortgage is a big deal, so it’s smart to be prepared. One of the best things you can do is check your credit score early on. This gives you time to fix any issues and improve your score, which can help you get a better mortgage deal
Experian have laid out a plan to follow that will help you get on top of your credit score, so you can secure a mortgage and get the best rate possible.
Why is your credit score important?
Your credit score is a number that shows how creditworthy you are. It helps lenders decide if you’re likely to make your payments on time. Credit reference agencies, like Experian, calculate it based on your credit report. While there’s no universal score, it gives you an idea of how lenders see your past financial behaviour and where you might need to improve.
A low credit score is a common reason for mortgage application problems. That’s why it’s important to check your credit report and score before you start looking for a new home. This way, you have time to get it in good shape.
Here’s a 12-month plan to make sure your credit score and finances are in the best shape before you apply:
12 months out
- Check your credit reports and scores carefully: Do this with all credit reference agencies (for free). You’ll see where you stand and learn where you can make any improvements. You can monitor your Experian Credit Score for free with our app, to help track your progress before you apply.
- Start building a credit history if you don’t have much right now: Make sure you have a bank account and consider a credit card. Spend a little each month and pay it off in full to avoid interest.
- Start thinking about repaying existing debt. Maxed out credit cards are bad news for credit scores. If lenders see your borrowing has increased recently, it could also cause concern.
- Avoid missing any payments over the next 12 months and these will negatively impact your credit score. Make sure everything is set up on a direct debit to avoid any payment hiccups
6 months out
- Make sure you’re registered on the electoral roll: This helps with ID checks when you apply and can also increase your credit score.
- If your credit report is still linked to an ex-partner’s and you no longer have a financial link, ask the three main credit reference agencies to break the link.
- Have a last push to bring down any existing debts. Try getting credit card balances below 30% of the credit limit if you can. The lower your debt the better it is for your credit score.
3 months before you apply
- Try to avoid applying for new credit and other products that involve a credit check. Your mortgage lender might view other recent applications with suspicion. You might also want to avoid using Buy Now Pay Later.
- Keep an eye on your spending. Mortgage lenders will scrutinise your financial behaviour, especially in the months before your application. Avoid any gambling transactions and try to keep your spending as frugal as possible.
When it’s time to apply
- You can get as many mortgage quotes as you like without harming your credit score: However as soon as you apply or get a mortgage ‘agreement in principle’, this is likely to register a hard footprint that can affect credit scores. So only do this once you’ve found the right deal for you.
- If you’ve got a more complicated situation, like being self-employed or having a negative credit history, consider using a free broker to help you search for the right mortgage for your circumstances.
First Time Buyer is an exciting bi-monthly glossy which takes a stylish and comprehensive look at all the options available, setting them out in an entertaining and informative way, and helping potential customers navigate their way through what is often a daunting and complex process. We dispel the myths, reinforce the facts and arm the reader with the tools necessary to make their homeownership dreams a reality.
