How do I improve my credit rating?

Mortgage lenders are paying increasing attention to borrowers credit ratings, and being below par can either impact badly on the mortgage terms being offered to you or in extreme cases stop you from getting a mortgage altogether.

When applying for a mortgage, lenders routinely carry out a credit check which provides them with a breakdown of all historical financial transactions held in your name. This records how much you have borrowed and how you have behaved in relation to your commitments, i.e. are you a good payer and have you paid on time. This check also provides a “credit score”; the level of which forms a key part of the lenders decision making process. Scoring systems are never published and will differ depending on both the lender and the product being applied for, however as a rule of thumb the higher the level of score obtained the better chance you have of obtaining a mortgage.

Censeo Ltd. have provided a few easy steps to improve your credit score:

• Obtain a copy of your credit report and check the content. The reports can occasionally contain mistakes and either incorrectly show a missed payment or sometimes link two unrelated customers with similar names together. If any information is incorrect you need to get it removed.
• Check that you are on the electoral roll. This is used by prospective lenders to check who you are and where you have been living.
• Try to pay off existing debts before you apply, or at the very least reduce them by as much as possible.
• Don’t miss or make late repayments on any loan, credit card commitment or utility bill such as gas, electricity or water.
• Keep within your bank overdraft limit and preferably keep in credit for at least 6 months prior to applying for a mortgage.
• If you’ve never had credit before, it can be difficult for a lender to assess you. Consider taking out a credit card, make a couple of purchases on it each month and then repay in full within the prescribed time limit.
• If , on the other hand, you have too much credit available on existing cards this can work against you. Consider closing any accounts you don’t need or use anymore.
• Avoid any major changes in your financial circumstances before you apply.
• It’s not always easy, but avoid a job change immediately prior to submitting a mortgage application.

For more information on mortgages and credit ratings contact specialist mortage advisors Censeo Ltd.