If you’re thinking of applying for a mortgage sometime in the future, its important to start planning well in advance to avoid any potential pitfalls. One major stumbling block for many people tends to be the dreaded Credit Report.
Lenders use credit reports to decide whether to lend to you, how much to lend and how much interest to charge you. If you plan well enough in advance there are some ways you can improve or maintain your credit score so when the time comes to apply for your mortgage you have one less thing to worry about. However, there are no quick fixes and unfortunately it won’t improve overnight, which is why at Beacon Mortgages we stress how important it is to look after your credit score and start any attempts to improve it well in advance of an application. Your score is calculated using years of past financial behaviour, not just recent activity. Most negative marks will remain on your file for at least six years, after this everything is deleted including missed payments, defaults, bankruptcy and County Court Judgements.
What is a good credit score according to The Money Advice Service?
What does your credit report include?
• Personal details, your name, date of birth and address
• Electoral role information for your current and previous addresses
• Your credit rating and score
• A list of all your credit accounts (such as bank accounts, credit cards, personal loans, mortgages)
• A six year payment history showing whether you have made your repayments on time and in full
• Search footprints, details of who has searched your credit report in the last two years
• Details of people you are financially linked to
• Late payments, defaults, CCJs, Bankruptcy etc
Using our tips below, you could increase your credit score and boost your chance of a better mortgage deal.
• Reduce or eliminate your credit card balances and unused credit balances – if you have multiple credit card balances it may help to consolidate them with a personal loan. Pay off cards with small balances.
• Always pay bills on time, even one missed payment can affect your score
• Leave old good debts on your report, this will help show a lender you have consistently paid off and satisfied old credit agreements
• Register on the electoral register, sounds simple but if your name isn’t currently on the electoral register you will find it much harder to get credit
• Check for mistakes on your file, however small, as these can impact on your score
• Check for fraudulent activity, contact the Credit Reference Agency immediately to report any fraud on your account
• Should you have little or no credit history, to prove your credit worthiness consider getting a credit building credit card.
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