What To Do If You Have A Poor Credit Score

Unless you’re a cash buyer, chances are that when it comes time for you to buy a house, you’ll need to take out a mortgage, a long-term loan that’s secured against the property that you repay over a set number of years, with interest.

In order to be able to take out a mortgage and in order to enjoy the best rates on these financial products, you’ll need to have a good credit score backing you up.

A credit score is simply a rating that you develop over time based on your financial history and this is what lenders will look at to see how responsible you are when it comes to financial management.

Now, it’s by no means uncommon for people to shy away from taking out loans and credit cards because they don’t want to take on debt of this kind, but this can actually work against you when it comes to property purchases. 

You need to take on credit in order to build up your credit score, so even if you have no need of a credit card or similar, it might be an idea to do so by way of demonstration to lenders that you are indeed responsible.

However, ‘responsible’ is the key word here and if you’re not careful with your spending and you fail to make repayments, you could find yourself with a poor credit rating… and this can get in the way of you and your homeownership dreams.

Before you talk to any mortgage lenders and before you start house hunting, it’s always advisable to take a look at your credit score so that there are no nasty surprises. Once you know what you’re working with, you can take meaningful action.

It’s certainly not uncommon for people to have a poor credit score without even being aware of it. 

We once had a client who had a £10 cancellation fee charged by a car insurance company without her knowledge and non-payment of this had been quietly tanking her credit score for a couple of years… so when she came to apply for a mortgage, she was initially rejected. 

Knowledge is power, so always check your credit rating before you do anything else.

What to do if you have a poor credit score

First of all, don’t panic. Many people have poor credit ratings and they’re still able to move ahead with their house-buying plans.

It can take a bit of time and patience but you can restore your credit rating. Always make your payments on time and in full where possible, as this is a signal that you’re able to manage money responsibly.

Register to vote if you haven’t already and make sure that your address is up to date on the electoral roll, as this allows lenders to confirm who you are and where you live.

And don’t apply for lots of credit within a short space of time. Each application will leave a mark on your report and will affect your score, so spread your applications out and only apply for credit that you’re likely to get.

Of course, these are only a few pieces of advice – so if you need any further guidance, get in touch with the BR Needham team today.