How to improve your credit score?
Before lenders agree to lend to you, they will always assess your credit. The better your credit score, the more chance you have of obtaining a better rate and getting accepted for a mortgage. Even if you aren’t currently planning on applying for a mortgage, it’s always best to stay on top of your credit score.
Your credit score is based on how you have managed your money previously, things like credit cards and phone bills for example.
Register to vote
By registering to vote, you’re reassuring lenders that you are who you say you are. Because the list is the official Government list of voters in the UK, it reassures lenders against identity fraud.
Pay your bills on time
Again, it may seem obvious, but paying your bills on time will make a big difference. Set up regular direct debits to be paid, such as your rent for example. If you have missed one or two payments, don’t worry this shouldn’t influence your credit score too much.
Pay off any debts
Most of these points may seem obvious, but if you do have current debts, try and clear them before applying for new line of credit. All forms of lenders such as banks, credit cards and building societies will think twice about lending to you, if you already debts against your name.
Don’t go over your overdraft limit
An overdraft is basically a short term loan, although you may not consider it to be an official loan. Therefore, going over your overdraft limit is going over the limit with the lender and that will be seen as a negative.
Cancel credit cards you don’t use
If you have a credit card you use and pay off each month, that’s great for your credit rating, this illustrates to the lender that you are a responsible borrower. If you have credit cards in your name that you don’t use, this can be a negative. This is because the card is left at risk to fraud and may also be linked to a previous address.
Don’t take out cash with a credit card
This is a point you may not be aware of. If you take out cash at an ATM using your credit card, you will incur additional charges. Therefore, by using your credit card and not your debit card, it will look as if you are not good at managing your funds.
Check if your credit is linked to someone else
If you have a joint account with a partner or friend, your credit will automatically be linked. If they don’t have a great credit rating, that could have a negative impact on yours. Providing you no longer need the joint account, ensure that you close it.
How to check your credit report?
Each agency will calculate a good score in a different way. Therefore, it might be a good idea to obtain a credit report from each agency. As you will see below, a good score for TransUnion is 4 out of 5, whereas with Equifax is 420 out of 700.
- Experian: 880 out of 999
- Equifax: 420 out of 700
- TransUnion: 4 out of 5
Fix any mistakes you find on your credit report
If you find that there is an outstanding bill, that you have actually paid, you need to contact them to get them to amend your record.
How to build credit?
If you have never borrowed any money, that is not seen as a good thing. It is important that you illustrate to lenders that you can borrow responsibly and pay it back.
Therefore, it may be worth looking at using a credit card, regularly and responsibly. If you use the card and pay off the balance in full every month, this will help improve your credit score.
How can a Mortgage Broker help you get accepted?
If you don’t have the best credit rating and need to apply for a mortgage sooner rather than later, a mortgage broker like M.A.I.N can help. We have access to over 70 lenders and know which lenders are more likely to accept you.
Because you are applying under the name of Mortgage and Insurance Needs, we have an established relationship with the lender and therefore further increase the chances of you being accepted.