how to improve your credit score
Just in case you didn’t already know, your credit score is essentially a measurement of how reliable you are at borrowing and repaying money. It’s established using information such as
the number of accounts you have
the types of accounts
your used credit vs available credit
the length of your credit history
your payment history
What does this mean? Well, when it comes to buying a property and securing a mortgage, lenders will use your credit score and history to determine whether or not to lend to you.
If you’re worried because your credit score isn’t very good or perhaps you even have a blip in your credit history like a missed payment, there are things you can do to actively improve your score and better your chance of getting a mortgage approved. Take a look at some of our tips below...
Register to vote
Lenders not only need to check how you’ve managed your finances in the past, they also need to confirm your identity.
Check for mistakes on your file
When performing a credit check, be sure to review all the details thoroughly. Things like a wrong address can affect your credit score. Also, if you spot any information that you think is incorrect, be sure to contact your credit reference agency as this could be fraudulent activity.
Pay your bills on time
Whether it’s a utility or phone bill, continue paying these on time. This demonstrates you can manage your finances well.
Pay off debt
It’s easier said than done, but the more debt you can pay off before applying for new credit, the better your chance of securing a mortgage. As you would imagine, lenders might be hesitant to approve your mortgage if you already have a lot of debt.
Use credit cards wisely
In the right hands, a credit card is a great way to build credit history. Spending small amounts and paying your bill off monthly makes you appear more attractive to lenders and will definitely help boost your credit score.
Avoid multiple applications
It’s best to avoid making one application after another if you’ve been rejected. When you submit an application, the lender will do a “hard credit search” to see whether you’re eligible or not. This will leave a trail on your credit, and other lenders will be able to see it. If you’d just like to compare rates, ask them to do a “soft search.” This will give you an idea of whether your application could be accepted or not, but it won’t show on your credit report for other lenders to see.
Check your credit file often
Just to reassure you, performing a credit check yourself will not impact your score. It is actually a great way to keep an eye on your rating and ensure all the account information is correct.
Keep your credit utilisation low
Something worth mentioning is the importance of keeping your credit utilisation low. This means that you shouldn’t use all of your available credit, but preferably keep it under 30% of your limit.
Though there are specialist lenders who will consider you even if you have bad credit, these mortgage deals will cost you more! To avoid disappointment and hassle, start actively improving your credit score following our tips above.
