Credit Scores & Why They’re Important For Mortgages

If you want to borrow money to buy a property, it’s likely that you’ll need to take out a mortgage in order to do so, unless you’re a cash buyer. It’s also likely that the amount you’ll need to borrow will be significant, which is why lenders use a credit scoring system to make sure that you aren’t a risky investment.

Your credit score is the rating that credit reference agencies like Experian will give your credit history, which is based on how well you’ve managed your current and previous debts. There isn’t a specific score that you need to have in order to be accepted for a mortgage, but the higher it is the greater your chances of being accepted.

Having a higher score means that lenders will consider you to be a lower risk and will be given greater assurances that you’ll be able to keep on top of the repayments.

You might think that never being in debt would mean that you’ll be viewed favourably by creditors, but they need to be able to see evidence of good money management, so taking on credit of some form can prove particularly beneficial, giving you the opportunity to demonstrate that you are financially responsible.

How can you build up a good credit score?

If you’d like to improve your credit score before applying for a mortgage, there are various ways in which this can be achieved.

Make payments on time

If you have any credit products, always make sure the payments are made on time. If you miss one or pay one late, this can be recorded on your report. Setting up a direct debit is the best way to ensure you never miss a payment.

Check your report for mistakes

Small mistakes can have a big impact on your score so always check the report for errors before you apply for your mortgage to reduce the risk of being declined.

Register on the electoral roll

Proving where you live can help boost your score, so make sure that you’re on the electoral roll at your current address.

Submit notices of disassociation

If you have a joint account with someone that you’re no longer linked to, get in touch with the credit reference agencies to submit a notice of disassociation. Any financial links can impact your eligibility for credit if the other person doesn’t have a good credit score.

Spend wisely

If you carry a lot of debt and often find yourself close to your credit limits, it’s an indication that you’re overly reliant on credit and this can make it harder to get the mortgage you want.

Move house less

Keeping the same address can help improve your credit score because your home address backs up your identity, helping to prevent fraud. It’s also an indication that your circumstances are generally secure.