If you are consider buying a houseReviewing yours should be one of your first priorities credit-worthiness. The best mortgage deals are usually only available to those with excellent credit history as they are less likely to default on repayments.
Bad credit isn’t a barrier to getting a mortgage, but borrowers who have missed a loan or credit card payment in the past should expect to pay more.
Lenders have tightened their criteria since the 2007-08 financial crisis and those trying to get ahead the apartment manager face an intensive test.
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Kevin Roberts, Director of the Legal & General Mortgage Club, says, “With budgets tightening and life busy, it’s easy to see why so many people have bad credit records today. But even a small mistake in a borrower’s history – like an expired credit card or a missed phone bill – could cause many big banks to turn down a mortgage. ”
Alastair Douglas, CEO of credit rating company Totally Money, says repairing a loan could save thousands of borrowers. “The average 90 percent mortgage lending mortgage (£ 207,000) could cost an additional £ 14,587 in the first five years and an additional £ 78,500 over a 25 year term if you have poor credit.”
Your creditworthiness is calculated based on your payment history. This includes how long you have been managing your borrowing and how much of your total available credit you are using.
Get map knowledge
Take out a credit card can improve your credit score, but spend wisely and make sure you always meet minimum monthly repayments. Don’t maximize your credit allowances, and keep in mind that if your credit card provider recently increased your allowance, it may take a while for credit bureaus to be notified.
“If your credit card provider recently increased your limit but did not notify the helpdesk, it looks like you are using up most or all of the available credit when in reality you could only use half of your new limit”, says Holly Andrews, managing director and consultant at KIS Finance.
Richard Hayes, CEO and Co-Founder of Mojo Mortgages, adds that “Credit Builder” cards can be worth taking out – but they have above-average interest rates.
Bad Credit? “Quick corrections”
Daniel Hegarty, founder and managing director at online mortgage broker Habito, shares his top tips.
- Make sure you are on the electoral roll as this will allow lenders to verify who you are.
- Challenge any mistakes in your credit report.
- Check out all three reference agencies – TransUnion, Experian, and Equifax – before applying for a loan.
- Cancel unused credit / loyalty cards and pay out small amounts
- Avoid payday loans / cash withdrawals from a credit card as lenders see you as risky.
- Pay your bills on time.
Ask friends and family
If you don’t like the idea of taking out a credit card, consider asking a family member if you can be added to one of their cards as an authorized user – just make sure they have a long history of responsible credit use.
Ms. Andrews explains, “That doesn’t mean you are actually using your card; Your name will only be added to the list of people who can do so. As an authorized user of this account, it will be added to your credit report – and any good credit history will improve your score as if you were using it. ”
Case study: the returnees
Lisa Philips, 49, life coach from Northamptonshire
“I returned to the UK three years ago after living in Sydney for 20 years. I moved my coaching business with myself but after 20 years I had no credit history in the UK.
“I had two houses in the UK before, but that was so long ago it doesn’t count.”
“So I started from scratch – took out small amounts of credit that I paid back. I also had to file enough self-assessment tax returns to prove to a lender that I was able to get a mortgage.
“Fortunately, everything is rolling this year. According to this year’s tax return, I can get the mortgage I want – so I can’t wait to arrange everything. ”
Lisa Philips (greatcoaching.co.uk) is the author of The trust coach (Exile, 2015)
Get the help of an advisor
If you can’t wait to recreate your credit report, you can turn to a specialist mortgage advisor. For example, Impact is a specialized mortgage broker who helps people with serious credit problems (such as defaults sticking to a credit report).
Legal & General’s Mr. Roberts says, “Once a borrower has been turned down by a high street bank, he may feel that there are no other options.
“However, specialized lenders target people with more complex financial needs, such as poor credit history.
“Even specialized lenders do not use automated mortgage application systems and instead draw each application manually to fully understand the individual’s personal and financial situation.
“Anyone who has pledged to improve their financial situation does not deserve to be excluded from a mortgage.
“If you are unsure of your next step, a mortgage advisor is a good place to start. Ultimately, they offer support and access to the right loans – this gives you the best chance of securing home ownership. ”