Just because you have a low credit score, doesn't mean you can't still get a mortgage.
If you were about to lend someone a large amount of money then you’d want to know that they are responsible, capable of paying it back and aren’t hiding anything below the surface, right?
That’s why lenders look at credit ratings to help decide whether to a) lend you money b) how much to lend you, and sometimes c) how much interest to charge.
Given this, there are a number of ways to prove you are a trustworthy individual who can manage your finances responsibly, and are able to pay back what you borrow. If you can clearly prove that you have a good credit score, then you’ll stand a better chance of getting the mortgage deal you want, and ultimately will be able to borrow the maximum amount to help you buy the house of your dreams.
The first place to start is to find out how good or bad your credit score is.There are various companies out there i.e. Experian, Equifax, Callcredit, who can give you your credit score. This will be a thorough report of all your credit accounts, including outstanding loans and any missed or late payments over the last six years, as well as any other people who are financially linked to you.
Start by proving you have a good history when it comes to managing your finances. Having a history of bank accounts e.g. a current account, savings accounts, ISAs, credit card etc. will give your mortgage adviser a decent history of your credit to look back through.
Lenders will need to see proof of your name and address in order to trust you are who you say you are. Register on the electoral roll and make sure all of your bills are registered to your current address. This way, everything is easy to trace back to you and confirms your identity.
Always try to retain a good amount of available credit. Available credit is the difference between what your outstanding balance is and your total credit limit. If your available credit is low, this would indicate that you’re struggling to keep tabs on your finances. Also, never withdraw cash from your credit card. This will go against your credit score as it looks like you’re having to make the withdrawal because you have no money left in your own bank account, even if this is not the case.
This may sound like an obvious one but missing payments will have a detrimental affect on your credit score. Despite your hard efforts to do everything else, missing repayments shows that you are incapable of managing your finances and paying your bills on time - which isn’t great if you’re trying to get a mortgage.
If you know for a fact that you have bad credit - perhaps you’ve been buying things on your credit card for a while and only paying off the minimum interest - then you should stop using your credit card immediately. This will only be detrimental towards your mortgage application and is showing that you cannot be trusted to pay back what you owe.
Holding on to credit cards you no longer use not only poses a fraud threat but can also be misleading as to how much available credit you have, so make sure you cancel any accounts you don’t use and cut up the card before throwing it away.
If you’re concerned about your credit score, or would simply like to chat about your credit rating and it’s implications on your mortgage application, please contact us here at Mortgage Advice Bureau. Our expert mortgage advisers will offer advice and guidance to help your application go ahead as smoothly as possible. Simply call us today to arrange either a face to face or over the phone appointment.
Read our Credit scores part 2: getting a mortgage with a low credit score article.
Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances.
The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.