More and more people are taking advantage of current market conditions and buying a new home due to unprecedented mortgage approval rates. Low interest rates, increases in lending and small deposit mortgages have all played a role in creating the perfect scenario for both buyers and sellers, as we recently reported here. However, a good credit score is still essential to securing a mortgage, that is why we have put together a quick guide to explain how to manage your credit rating.
The Issues – Credit Scores
That’s because a person’s credit score plays such a massive role in securing a mortgage. And it can be negatively affected by all manner of things – even open credit cards that aren’t in use. According to The Money Advice Service, a missed payment on a direct debit for the likes of a phone bill or a gas or electricity bill can have a big impact – and it remains on your credit file for up to six years.
Other things that affect your credit rating include things like: having high levels of debt, moving house a lot, not being on the electoral register, and being tied to accounts linked to somebody with a poor credit rating. Though not always resulting in an outright application rejection, a poor credit score can have a big impact on the percentage of interest applied to the proposed mortgage; at times too high to make the mortgage worthwhile taking on.
Therefore, to increase the odds of attaining a manageable mortgage, steps have to be taken to improve your credit rating (if it’s lower than it should be).
How to Improve Your Credit Score?
The bottom line is, lenders want to see consistency, and there’s some immediate steps that you can take to improve your credit score, according to The Money Advice Service.
- Stop applying for credit until you’ve sorted out any problems on your credit file and improved your credit score.
- Get on the electoral register. If your name’s not on there you’ll find it much harder to get credit. You can register to vote online or by post.
- Cancel unused credit cards. This also reduces the chances you’ll fall victim to fraud if they were to be stolen.
Long term steps to take
There’s also a couple of key steps that people who hope to own their own home can take in the long term to improve their credit score. It may sound obvious, but paying all bills on time – and paying cards of early if possible – is a big positive. It shows lenders that you’re a sensible borrower, who’s able to keep on top of bills month to month.
And if you’re confident about being able to clear a credit card each month, there are credit-builder credit cards out there that can help people rebuild their credit rating. Beware, however, that these often feature high interest rates, so to avoid this pitfall; they must be paid off in full every month.
Get the right advice
As well as looking at sites such as The Money Advice Service, it can sometimes be wise to seek more personalised, professional help. The Mortgage Hub offers expert mortgage advice, and as sound independent advisors, have an impressive track record of successful mortgage approvals.
So if you’re working on improving your credit rating, and looking to purchasing a new home, why not contact Clyde Property for advice on what type of property could be right for you.
Clyde Property is a leading independent, multiple award winning estate and letting agent with 30 years’ experience in selling and letting property in Scotland. Just call your local Clyde Property branch today, for friendly, impartial advice on finding your next dream home.