Welcome to July’s column from Mortgage Advice Bureau East Kilbride, this month I want to give you an insight into an important part of getting a mortgage – credit scoring.
We are often asked ‘What credit score do I need to get a mortgage?’ and although having a high score helps, there a such a variety of lenders available that it isn’t always the be all and end all of getting a mortgage.
However, here are some key hints and tips on what lenders look at when you are looking to get a mortgage so you can aim to put yourself in the best possible position when it comes round to applying.
There are four main credit reference agencies that are used by the lenders in the UK.
These are Equifax, Experian, TransUnion and Call credit and they all have their own scoring system. Experian for example use a score up to 999.
There are multiple websites such as Clearscore or Totally Money that will take your personal and financial information directly from one of the four main credit scoring companies above.
They will then integrate this with their own scoring system. Clearscore for instance will use a score up to 700.
When we submit a ‘Decision In Principle’ a lender will review the information from your credit file along with your personal information to make an informed decision on whether to lend the amount you’re looking for.
When doing this they will look for things such as:
- Have you maintained your credit payments, especially within the last 12 months?
- Have you had any adverse credit such as defaults?
- Are you on the electoral roll at your current address?
- How many credit facilities have you got?
- How much available credit do you have?
- What percentage of your credit facilities are you utilising?
Lenders will also factor in personal data such as salary and additional income like bonus, overtime and commission, length of time at your current address, your employment status, your credit commitment balances and payments and the borrowing amount against the property prices you are looking at, called ‘Loan to Value’.
You shouldn’t focus too much about what your credit score is, instead focus on the credit file itself.
For example, if you bring your credit usage down to below 50 per cent of the available limits this will help over time and make sure you are on the electoral roll so you can be easily identified.
You should also check the details held on your credit report are correct and up to date, if there is anything incorrect then get in touch with the relevant credit reference agency or the company who is reporting the data, such as mobile phone provider or credit card company and they should be able to update it for you.
Credit reference agencies generally update their files around four to six weeks after a payment event occurs so if you are paying off or reducing a debt, it may take a while for it to be reflected on your score and file.
I hope that has been useful in gaining an insight into how you can improve your chances of getting a mortgage, see you all in August.
Don't miss the latest headlines from around Lanarkshire. Sign up to our newsletters here.
And did yo u know Lanarkshire Live is on Facebook? Head over to our page to give us a like and share.
