Having a big enough deposit isn’t the end of the game. It’s just the start.
These days, affordability and credit checks play a crucial part in a lender’s assessment of whether they will give you a mortgage.
Each lender has its own bespoke criteria, so this is more art than science. Think of it as a beauty parade where you need to make yourself as attractive as possible to lenders in the hope they’ll pick you out of the line-up.
Not everyone will view you the same way, but there are many little and large things you can do to shape up and stand out that are likely to make a big difference. Let’s run through them…
Boost your credit score
This isn’t a quick fix. Some of the techniques below need to be done months before applying, so ensure you do the necessary groundwork in good time or risk a rejection.
The lender’s aim is to ensure you’re a profitable customer and can make your repayments. It does this by credit scoring you, to try to predict your future behaviour based on your past.
These criteria aren’t published, so it’s impossible to pinpoint which lender wants what. But many mortgage brokers have a reasonable idea which lenders are pickier and what they look for in a borrower.
Lenders are now much more selective — if your score is poor, almost all will reject you.
“Think of it like a beauty parade where you need to make yourself as attractive as possible to lenders.”
Get on the electoral roll
If not, it makes life so much more difficult. Go to www.gov.uk/register-to-vote to register
on the electoral roll or to check whether you’re already registered. For anyone ineligible (mainly foreign nationals), you can add a note to your credit file saying you’ve other proofs of address/residency.
Check your credit file
Get copies of your credit file from all three credit reference agencies — Equifax, Experian and TransUnion (formerly Callcredit). But don’t bother paying for ‘credit scores’ that the agencies try to flog you, they’re only loosely indicative.
Once you get your file, check everything for errors. If you think your file is wrong, ask the lender to correct it. You can add a notice of correction to your file explaining why it’s unfair or how the circumstances arose. If the credit reference agency won’t help you, you can complain to the Financial Ombudsman Service.
Just remember that lenders also rely on your application form and their past dealings with you, which the credit files don’t contain.
Check addresses on your file
It’s one thing people often miss. Check your address is up to date on all active accounts (even if you no longer use them). One woman didn’t get a mortgage because her unused but still active old mobile contract was listed at a past address. Anything unusual causes lenders to worry.
“Don’t bother paying for ‘credit scores’ that the agencies try to flog you, they’re only loosely indicative.”
Break with past relationships
Write to credit agencies asking to be delinked from any ex you had joint finances with. This stops their credit history affecting your applications.
Build / rebuild your score
If you have a poor credit score, it takes time to rebuild it. Perversely, one way to do it is to get a credit card and spend on it each month. This proves to lenders you can borrow responsibly.
Yet only do this if you ALWAYS repay in full to avoid interest. Put about £50 on it each month, clear it each month for a year, and it should help.
Time it right
Issues such as county court judgments for unpaid bills are wiped from your record after six years, so wait for that until you apply. Applications only stay on your file for a year, so if you’ve a raft of those (eg, lots of credit cards) then wait.
Don’t miss payments / pay late
Set up a direct debit to make at least the minimum repayment on credit cards so you’re never late and never miss a month. It’s always better to repay more, so make manual repayments on top when you can.
Keep other applications to a minimum in the months before a mortgage
Applications, whether successful or not, go on your file, so space out applying for anything that adds a footprint to your file (including car insurance and mobile phones). The worst thing is a lot in a short space of time as it makes you look desperate for credit.
Prioritise your mortgage if that’s the most important thing, and hold others off until you’ve got it.
Never withdraw cash on a credit card
This is specifically noted on your file. It’s frowned upon as its incredibly expensive and not a good sign. It looks like you’re desperate for cash and can’t live within your budget.
Never apply after rejection
Always check for errors on your credit files before applying for anything else. If not, even if you fix an error later on, all the footprints from rejected applications may kibosh your ability to gain credit anyway.