We all know how important a good credit score is when you come to apply for a mortgage, but it is more difficult to understand exactly what actually helps to make your credit score good. Obviously making sure you don’t miss credit payments is the main one, but there are some things that you may not expect to be important, that actually are.
For example, having a lack of credit history can be a problem. Even though you might be the best saver in the world, and have never needed to borrow money off anybody because you are ultra frugal and well organised, lenders still would like to know what you are like at paying back debts, and they don’t have anything to work off.
The most important non-financial factor is making sure you are on the voters roll, if your not you may seriously damage your chances of getting a mortgage. This can be rectified, but there are time delays involved and when it comes to obtaining a mortgage, having patience isn’t always easy.
With certain lenders, telling them a home telephone number helps slightly. This is a personal bug bear with me because I don’t have any need for a home telephone. My partner and I both have contract mobile phones with unlimited internet access. There is no point us paying for a land line. Yet for some reason, certain lenders like it, so if you have one, tell them you do.
Credit cards are a tricky one. Lenders don’t like you being too close to your credit limits, because they worry you are living beyond your means. Conversely, they don’t like you having too much unused credit in case you draw down all this credit at the same time and get yourself into a mess.
If you are financially associated with anybody who has bad credit, this can slightly drag your score down. You can however rectify this by writing to the credit reference agencies and telling them when you are no longer financially connected to them.
Changing bank accounts, moving home or changing jobs too frequently can also lower your score. Lenders would prefer you to be steady and stable so that they aren’t worried they may lose track of you, or that your situation will change so that you are not able to service your debts.
Finally, the dirtiest words in the finance world, payday loans. Although they are actually a valid solution at certain times, and something that could be recommended to help fill a gap once in a while, lenders look at the worst case scenario and put the main reason for payday loans down to bad money management. This isn’t quite fair, because this isn’t the only reason payday loans are taken out, but then again, who ever said lenders cared about being fair?
Kieron Bassett Financial Services has two Independent Financial Advisers who specialise in mortgages and investment advice. Contact us on (01524) 832057, via e-mail, info@kieronbassett.com, or visit www.kieronbassett.com.
Jason Hinde DipPFS
27th October 2014
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