How to Improve Your Credit Score
Simply put, the higher your credit score, the higher your chance of having your mortgage application accepted. But how do you improve your credit score?
It’s worth noting that no one is guaranteed to be accepted for a mortgage. This is because each lender has developed their own scoring system over the years, meaning you need to showcase different things to different providers. Therefore, don’t worry too much if you fail with one lender as there are other mortgage lenders who may be more forgiving.
It is your Mortgage Advisor’s job to match you to the right lender, hopefully first time, but this is not an exact science. Both you and your Mortgage Advisor want the same thing which is for you to end up with the best deal available to you.
There are several different credit reference agencies in the UK, including Experian and Equifax. It is a good idea to check as many of these agencies as possible to get a rounded picture of your credit score. Also, it is possible that one of the agencies may be holding incorrect data. Checking with several agencies will help you identify any such discrepancies.
There are some good practices listed below regarding things you can be doing to improve your credit rating.
Ways To Improve Your Credit Score
Avoid Unnecessary Credit Searches
Multiple credit searches can have an adverse effect on your score. This is because it signals to lenders that you’re looking to borrow more which is something they don’t like to see.
Be especially careful when using price comparison websites, because they are major culprits of credit searching on individuals. If you know you want to apply for a mortgage soon, it is wise to avoid applying for any other credit in the lead-up.
Check You Are on the Voter’s Roll
Being on the electoral roll adds a lot of points onto your score. It indicates stability and lenders like that. Ensure your name is spelt correctly and that it’s your current address you are registered at, not an old one. If you are not registered it’s easy to do so online.
Don’t Run Close to Your Maximum Limit
If you max out your card each month that will reduce your score.
Using a credit card and paying off the balance in full each month is good practice because it indicates that you are good at managing your money. However, maxing out your limit or, worse still, exceeding an agreed card limit or overdraft does not look good.
Check Your Address History Is Keyed Correctly
Quite often it can appear that you are living in two places at the same time on your credit report. This occurs because you may have forgotten to tell one of your credit providers that you have moved to a new house. Check all addresses are spelt correctly. If you have lived in a flat this can be tricky as the flat/apartment number can be formatted in different ways.
Close Down Any Unused Credit Accounts
Too many credit cards can negatively affect your score. So, if you have cards you don’t use, contact the providers and get the account closed. In the short term, this can have a negative effect on your score as the credit reference can’t tell if it’s you that is closing the account or the provider. But don’t worry, it’s one step back to take two forward.
This is also a good practice as it reduces your chance of falling victim to fraud as you might not notice you have lost a card you don’t use regularly.
Remove Financial Links to others
If you have a family member or ex-partner connected to you then their actions could be affecting your score.
However, you won’t be able to get the financial association removed if the account is still live. To remove one of these links you should contact the credit reference agencies and make a request.
Many consumers feel credit scoring is an unfair way for lenders to assess applications. However, lenders feel differently as it is much cheaper for them to operate this way and computers give more consistent outcomes. Either way, this is the most common approach within the industry, so these tips should help you improve your credit score.
If you’re looking to increase your chances of your mortgage application being accepted the first time, then send an up to date copy of your credit report to your Mortgage Advisor upfront. The more your Advisor knows about your finances the better. Also, there are still some smaller lenders out there that do not use credit scores. These lenders do it the old-fashioned, manual way. Although they will still have certain rules about the number of defaults and CCJ’s they will allow.
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