When applying for a mortgage, a credit check will be carried out against your name and address to gauge your credit rating based on your past payment activities. A report is generated and includes a wide range of information about your credit behaviour including:
- Use of credit cards
- Loans
- Repayment record
- Details of any overdrafts
- Bankruptcies
- Missed mortgage payments
- County Court Judgments
- Defaults on payments
- Late Payments
- Debt management
- Entered into Individual Voluntary Arrangement
There are three credit reference agencies, Equifax, Experian and CallCredit, and they all hold information on you which lenders use. Even small errors can cause problems, so it’s important you check through your file.
A credit report also confirms if your name is on the electoral roll at your current address and how many times your credit report has been searched.
Missed payments, defaults , County Court Judgements (CCJ’s) or bankruptcy in the past may cause problems for you when you apply for a mortgage, or any other credit.
In addition to a credit check, a credit ‘score’ will also be completed – each lender scores you differently and secretly so it is not an exact science. If you score enough points you pass, if you don’t you will be rejected – it is as simple as that. The results of a credit ‘check’ can also impact on your score.
To help improve your credit score:
- Keep up-to-date with any existing loan and credit card payments to show that you are a reliable person to lend to
- Pay off any outstanding debt if you are able to. Equally, don’t be afraid to use credit cards – just make sure you keep up to date with payments
- Make sure you are registered on the electoral roll and that the correct address is registered
- Avoid multiple credit searches within a short period of time – each application for credit will mean a new credit search. As each search will show up on your credit file, multiple searches can lead to some lenders thinking you are financially struggling
Those with a poor credit score can struggle to get a mortgage. Here at AscentiaUK we can advise you on which mortgage lenders will be best for you if you have concerns about your credit history, and help with your application.
We can also advise you on how to maximise your chances of passing a lender’s credit score.
To begin with it is best to obtain your credit file. You can obtain a free report below.
For further information on credit reports please look at our handy FAQ section below.
Q. How many credit reference agencies are there?
A.There are three credit reference agencies, Experian (the biggest agency), Equifax (the second largest) and CallCredit, and they all hold information on you which lenders use. Different lenders will use different agencies.
Q. How will I know which credit agency to obtain my report from?
A. If you are applying for a mortgage we would always advise you to obtain a credit report from the agency that the lender you are applying to uses. We can advise you of which credit reference agencies each lender uses. If you are still at the early stages and are not yet in a position to apply to a lender we would strongly advise you to check your credit rating with each of the three main reference agencies. In fact we would advise you to do this on a regular basis.
If time is of the essence and you can only use one, then we would advise you to choose Experian (the biggest credit agency) or CheckMyFile (checks Equifax and Callcredit).
Q. Do I need to pay to obtain my credit report?
A. Some reports can be obtained for free, whilst others can be obtained by signing up to a free trial period – after this you may have to pay a one off fee or a monthly subscription.
AscentiaUk has provided a link to Noddle – this is Callcredit’s service to obtain their credit report. It’s free for life and very easy to use. Callcredit is the UK’s newest credit reference agency. At present it tends to not be as widely used as the two larger agencies (Experian and Equifax) but Noddle is a good start. As mentioned above we would advise you to obtain reports from all 3 agencies if possible.
Q. Does checking my file have an impact on my credit rating?
A. No. Any checks you make are not recorded on your file so there is no need to worry about over-checking. No third party can see that you have checked – only you and the credit reference agency will know about it.
Q. How often should I check my credit file?
A. Our advice is to check your credit file regularly. It does no harm – it can all be done online and is very quick and easy to do. If all the details are correct it is likely to provide you with a great deal of reassurance too. It goes without saying that you should check your credit file before making any mortgage applications to minimise your risk of rejection.
Q. What if the details held on my file are incorrect?
A. If, once you have checked your file, you spot any errors it is crucial that you get these corrected or, if possible, removed.
Q. I have been rejected by one lender – will I be rejected by another?
A. Possibly – but it depends on the reason you have been rejected by the other lender. Just because you have been rejected by one lender it does not automatically follow that you will be rejected by another – after a rejection, it’s always important to check your credit file for any errors before applying again.
Of course, if you have had poor credit or had problems in the past it is likely that this will continue to impact on your ability to obtain a mortgage going forward. There are certain lenders who will consider offering a mortgage to those who have impaired credit but naturally you are likely to find that the rates and fees charged will be higher.
Q. How can I boost my credit score?
A. Whilst lenders are very secretive about their credit scoring it is true to say that there are certain things you can do to boost your score and improve your chances of being accepted by a lender.
The following list details what you can do:
• Register to vote by ensuring you are on the electoral roll.
• Don’t miss or be late when making credit payments
• Ensure that anyone you are linked to does not have impaired credit. Ensure that you are only linked to people who you should be linked to.
• Check eligibility prior to making any applications – if you don’t do this you risk having multiple checks recorded against you without ever having any real prospect of obtaining the credit you applied for.
• Too many searches, especially in a short space of time, can causerejections as it may appear you are desperate for credit and could be taken by a lender as a sign that you are in financial trouble.
• If possible ensure you have a credit facility such as a credit card – but always ensure you make your required monthly repayments on time.
• Avoid taking out a payday loan – this signifies to a lender that you are in financial trouble and can mean a straight decline.
• Try to clear credit and store card balances as often a possible – deleveraging in this way shows that you are on top of your finances and are not living beyond your means.
• On the flip side, cancel unused credit and store cards – too much unused credit can cause problems.
• Ensure you have a bank account opened and are not continually living in your overdraft. There is no issue in having an overdraft but living in it says to a lender that you are living beyond your means.
Get your FREE* multi-agency credit report now!
It's free to download your credit report within 30 days, then it’s £14.99 a month – you can easily cancel once you have obtained your report within the initial 30 day period by phone or even online.
