Credit Score
Your credit score needs to be good/amazing and you need to have one! What are they? There are various credit searching companies and currently new ones are popping up daily. The main ones the mortgage companies use are:
- Experian
- Equifax
- TransUnion UK
- Credit Karma
Months before you start looking at houses please get your credit report! If you have never borrowed money before you will find it very hard to get a mortgage as you will have no credit history. Parents think they are doing the right thing by telling their children never borrow money, save, save, save. In fact, this is as bad as missing payments on your credit.
If you were to lend someone 100s of 1000s of pounds would you not want to make sure that the person you are lending to will repay you on time every month?? I would! So, the credit history companies report on each and every persons credit. So, if you borrowed £1000 on a credit card each monthly payment you made is reported to these companies, what’s outstanding, what your payment was, if it was made on time and all the details of that particular credit account.
So, when you apply for credit, the company you are applying for credit with will request your information from the credit search company to make sure you are a good/amazing person to lend to.
If you have never had any credit borrowed before there won’t be much useful information to them.
Get a 0 % Credit Card to improve your Credit score
So, I would recommend in this instance to purchase items you would normally buy on a 0% credit card and set up monthly MINIMUM repayments on a direct debit basis. So that the minimum repayments come out of your bank account automatically. If you chose to pay them manually by cheque or bank transfer, you MUST pay them ON TIME. If you don’t this will make your credit history worse and may affect you getting a mortgage at all! You should continue to do this right up until you obtain your mortgage. This will show the mortgage lender you pay back your debts on time and this is the type of customer they want. However never borrow more money than you can afford to repay back, and this small extra monthly payment will be considered for affordability assessment for the mortgage. It may affect what you can borrow in total so as I say do not borrow more than you can afford to repay.
Voters Role
Make sure that after the age of 18 you are registered on the voters roll. You need to contact your local council to do this, but if you are living at your parents’ house you must make sure your parents do this if not do it for them. This is a search the lenders do to show your address history. When you have been at the same address for over 3 years this will increase your credit score.
Landline Telephone Number
If you have the internet you will have a landline number whether you use it or not. When applying for credit you must put this number into the home telephone box, this also makes a difference to your credit score.
Bank Account
How long you have had your bank account – if you have the same bank account for 10 years or more again this increases your credit score. The higher your score is and the more credit history you have the more likely the cheapest most suitable mortgage company will accept your mortgage application.
These are all things you can do in the previous 6 months to a year leading up to applying for a mortgage.
