How your credit score impacts mortgage applications
When it comes to buying a property, there are a lot of factors to consider. In the first instance, many of us start planning how we are going to save for the large deposit. We think about the type of property we’d like and how much we can afford to spend on our repayments and bills each month. But many of us are guilty of not considering how our credit score can impact us getting a mortgage for our dream property.
What is a credit score?
A credit score is a number given to you based on how trustworthy you are when it comes to borrowing money. It is based on how well you’ve paid off credit in the past. For instance, it might look at credit cards, loans and finance agreements that you pay off monthly, such as your car or mobile phone contracts.
How does this impact me getting a mortgage?
If you need a mortgage to get on the property ladder, then your credit score must be high enough for lenders to be happy to offer you the loan. If your score is low, they may consider you a risk and refuse to offer you a mortgage.
Is there a minimum credit score you need for a mortgage?
The simple answer is no, there is no minimum credit score required for mortgages in the UK. But the higher your credit score, the more likely you’ll be able to borrow the money and get access to their best rates. So it’s important that you take action to try and make it the best it can be.
How do I improve my credit score?
There is no hard and fast way to improve your score. But there are several ways to boost yours in preparation for a mortgage application.
- Use a credit card regularly. Making small purchases and paying off the balance each month will prove that you can borrow responsibly and can be trusted to pay back what you owe.
- Avoid applying for multiple finance deals. Each time you apply for credit, it’s marked on your credit score. If you make lots of credit applications in a short time frame, you could negatively impact your credit score.
- Put your name on monthly outgoings. If you can, make sure any bills you pay for each month are set up in your name. This will show lenders that you consistently pay back your bills on time.
- Register for the electoral roll. This simple act makes you more appealing to lenders, as they can quickly and easily verify your identity. You can do this on the gov.uk website in 5 minutes.
Make sure you effectively manage your finances and boost your credit rating prior to your mortgage application. It might make your dream home a reality!