CREDIT
1 Previous occupants of your address do not affect your credit score It is a common misconception that you are financially connected to someone you’ve simply lived with or who lived at your address in the past. In fact, you only become financially connected to someone else if you’ve had joint credit, such as a joint bank account or loan. Credit cards don’t count. 2 Credit reference agencies don’t decide who gets credit The three main credit reference agencies compile and store credit reports securely and make these available to lenders, with your permission, when you apply for credit. The agencies don’t make lending decisions; that’s up to lenders, who check the information in the report along with other information such as details from your credit application. 3 You do not have one single credit score Each lender uses a unique method to calculate your credit score based on their own experience with customers and on their lending policies. Some even use a different formula for different products, such as mortgages, personal loans and credit cards. Guide scores, such as the Experian Credit Score, are also available to the public. 4 There is not a credit blacklist Credit reports are simply factual and the majority of the information credit reference agencies hold is actually positive. Even if your credit history includes past missed payments or other negative information, you’ll usually be able to find at least one lender willing to say yes. You’ll probably pay extra though! 5 Checking your own credit report or credit score cannot damage your credit score You can do this as often as you like. Only when lenders check your report to assess a credit application is a “hard” footprint recorded that can affect your future score. That’s why it’s sensible to limit and space out your applications, and to use a credit eligibility service to help you shop around without collecting multiple hard footprints.
on. If you have defaulted on previous credit or been taken to court for non-payment of a debt, it’s going to be much more difficult to qualify for a competitive mortgage deal. You’ll be seen as a higher risk customer, which is likely to reduce your options to more expensive deals. It will help if you have repaid any past debts and made sure your credit report is updated to reflect this. And if you got into difficulties because of unfortunate circumstances, such as losing your job, suffering an illness or going through a messy break-up, you can explain this on your credit report using a “notice of correction”. Simply send your notice (maximum of 200 words) to each of the three main credit reference agencies (Experian, Equifax and TransUnion) asking for it to be added to the credit reports they hold about you. TOP TIPS TO HELP YOU GET YOUR FINANCES AND YOUR CREDIT HISTORY READY FOR A MORTGAGE APPLICATION James Jones added, “Mortgage lenders will put your financial behaviour under the microscope, especially transactions in the months leading up to the mortgage application. They will be looking to establish two main things: your financial reliability (your credit score) and your ability to meet future mortgage payments based on your income and spending.” Check your monthly budget so you have a good idea not only of your income but also your expenditure, as that will also be considered when the lender decides how much you can borrow. Have your paperwork together. Lenders may ask to see bank statements, payslips and P60 to support your application. Self- employed borrowers will need to supply their
Mortgage lenders look very closely at your existing borrowing. If you have debt on cards, loans and other credit, paying down these balances in the months leading up to your mortgage application could help your application. Try to avoid opening any new accounts that involve a hard credit check in the three to six months before you submit your mortgage application. You don’t want to appear overly reliant on credit, or even give the impression that you’ve borrowed some of your deposit from another lender. Take advice.There are thousands of products on the market from a huge range of lenders. Don’t focus solely on the interest rate as some can carry big fees that could erode the overall value. For example, those with a smaller mortgage may be better to opt for a deal with fewer or no fees. If you have had problems with credit in the recent past and your score is not great, considering getting guidance from an independent mortgage broker, such as L&C Mortgages, to help you find the best deal for your circumstances. experian.co.uk
tax self-assessment or accounts depending on the circumstances. Experian’s mortgage comparison service allows you to compare options from over 90 lenders in the market in under two minutes and provides access to both broker and direct-to-lender exclusive mortgage deals. Lenders will carry out a credit check and will also typically credit score your application. If you’re concerned that there could be a blemish on your credit report or feel there may be steps you can take to strengthen it, review your report before your mortgage lender puts it under the microscope – especially given that some lenders have been tightening their lending criteria. Obvious issues, such as an old debt not showing as paid or even small anomalies like the way your address is formatted, can delay or even completely derail a mortgage application, so ask for them to be corrected. Register to vote at your current address, which helps confirm your identity to lenders and is widely seen as a sign of stability. Ask for any outdated financial links to other people to be removed, such as an ex- partner. Otherwise, any financial problems they’re having could hurt your application.
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