They say buying a house is one of the most stressful things you can do. Working out what you can afford, scraping together a deposit, and finding your dream home are just the start.
To get a good mortgage deal, you’ll need to prove to lenders you’re a responsible borrower. Luckily, there’s something you can do to make that part a little less stressful…
Wait. What shape is your credit history in now?
First things first, do you know what your credit history looks like? If not, it’s free and easy to check your credit file for free. Do it now, so you’ll know exactly where you stand right now.
Your actual ‘credit score’ doesn’t matter as much as most people think. Positive data on your file is what counts – but your score could give you a rough idea of where you’re at.
If there are any errors on your file with any of the Credit Reference Agencies (CRAs), be sure to put them right as soon as you can – you don’t want anything on there that might ring alarm bells for lenders.
Even if you’re not planning to apply for a mortgage for a while, the best time to get your credit history in shape and address any issues is always today.
“The best time to plant a tree was 20 years ago. The second best time is now.” – Chinese proverb
What are mortgage lenders looking for?
To get a good mortgage deal, you’ll need to convince lenders you can be a reliable and responsible borrower. When you apply for a mortgage, they’ll look at:
- Your credit report – including your credit history and other information like any CCJs
- Everything in your application form
- Anything they already know about you (if you’ve been their customer before)
- Their own lending policy – every lender has their own criteria, so if one won’t lend to you, another might
Need to improve your credit history? No problem
There are a few things you can start doing right away to get your credit history looking as positive as possible before you apply for a mortgage:
1. Make a budget (and stick to it)
Potential mortgage advisers will take a close look at how you manage your finances, so put your best budgeting foot forward and try to save a little each month.
2. Repay everything on time
Whatever you do, don’t miss a bill payment. And, if you’re repaying a loan or credit card, paying off more than you need to always looks good to the CRAs (but don’t overstretch yourself to do it).
3. Stay generally credit fit
Basic essentials include registering to vote, staying within 50% of your credit limits, and trying to avoid other credit applications in the six months before applying for your mortgage.
4. Use a credit improving service
There are special credit cards designed to help improve your credit history, and you can pay for other services that aim to boost your borrowing power. But Loqbox is a completely free way to build your credit history just by saving as little as £20 a month.
Loqbox works by turning your monthly savings into loan repayments – proving your creditworthiness to lenders, and turning your ability to save into a better credit history. After 12 months of saving, you get every penny back plus improved borrowing power and access to better mortgage deals.
This post was written and compiled by the credit experts behind Loqbox – a completely free way to build your credit history by saving a little each month. To sign up or read more about the clever way Loqbox works, head to Loqbox.co.uk.