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How to improve your credit history and get a better mortgage

Your Money
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Your Money

Having a poor credit history could seriously affect your mortgage application. Follow our credit improving tips to get the best mortgage deal.

The Council of Mortgage Lenders recently reported that mortgage lending to home buyers in 2013 had got off to its best start to the year since 2008.

Those looking to take advantage of the mortgage deals on offer should spring clean their finances and credit history before they start applying for a new mortgage or plan to remortgage.

Having several credit cards with high limits and missing repayments could give the impression an applicant is financially over committed, and this could result in the lender refusing an application or charging higher interest rates.

It’s therefore vital consumers keep up to date with repayments, make sure they are registered on the Electoral Roll at their current address and ensure their credit history is in the best possible condition.

To get the best mortgage deal follow our top tips from the experts:

1. Your credit report
Before you do anything get a copy of your credit report – www.equifax.co.uk, www.experian.co.uk.

2. Credit agreements
Make sure all current credit agreements are shown as paid up to date. Your credit file will highlight any dormant accounts you might have forgotten about. Closing these will improve your credit status, as will paying off any agreements early.

3. Are you registered?
Check you are registered on the electoral roll at your current address – this is a crucial first check carried out by lenders to ensure the applicant is who they say they are.

4. Are you credit active?
If you haven’t been particularly credit active in the past this may affect your ability to secure a good mortgage deal. Having a ‘thin credit file’ – where you have no history of other credit agreements – might make it harder for lenders to assess your suitability for new finance.

So it’s worth considering opening an account to establish a credit history – even if it is paid off in full at the end of every month.

5. Shopping around for a mortgage
When shopping around ensure enquiries are logged as ‘quotation’ searches rather than ‘application’ otherwise multiple searches in a short space of time could impact on your ability to get credit.


6. Your mortgage application
Don’t be tempted to make untrue statements on your application, such as increasing the amount you earn.

Lenders will independently validate what you put on your application form and if they find discrepancies this may jeopardise your chance of getting a mortgage.

7. County Court Judgments (CCJs)
If you’ve had a CCJ and it is now settled make sure the settlement is recorded on your credit file. If not contact the court to get confirmation details and inform the credit reference agencies.

8. Avoid a high balance on your credit cards
Avoid carrying a balance that is more than 30% of your credit limit. Lenders may view this as a sign of you having too much credit already and that you therefore may not be able to keep up with any new repayments.

9. Be direct
It’s easy to forget a credit payment so setting up direct debits and standing orders with your bank will ensure payments go out on time and avoids any miss payments on your credit report.