Written by 10:00 am Buying, Featured, First Time Buyer, Mortgages

Unlocking the Mystery of Your Credit Score: A Guide for Aspiring Homeowners

If you’re moving along the mortgage journey, there’s no doubt you will have heard about credit scores.

For many prospective homeowners, that three-digit number known as the credit score often seems like a formidable obstacle. The good news is that a less-than-perfect credit score doesn’t necessarily mean the end of your homeownership dreams.

In the realm of credit, issues vary widely, and the market offers a plethora of options for those with less-than-immaculate credit scores. If you believe there’s room for improvement in your credit score and you’re keen on navigating the borrowing process, here’s some invaluable advice and guidance.

Decoding the Credit Score:

Your credit score is a pivotal three-digit number in your credit report, reflecting the scoring systems that mortgage lenders use to assess your mortgage eligibility. The higher the number, the better your credit score—a signal to lenders about your past credit management. A higher score not only lowers your risk but also opens doors to better deals and rates.

Three major credit reference agencies—Experian, Equifax, and Callcredit—operate in the UK. Lenders may utilise one, two, or all three to evaluate your creditworthiness. It’s advisable to check with each agency to ensure accurate information, and services like ClearScore and Noddle allow free access to your score.

It’s crucial to note that, while an excellent credit score is favourable, it’s just one element of a lender’s broader criteria.

What’s Inside Your Credit Report:

  • Full name
  • Current and previous addresses
  • Financial associations (joint credit accounts)
  • Presence on the electoral roll
  • Bankruptcies and court county judgments
  • Debt details and payment history
  • Age of credit accounts
  • Credit checks and any fraudulent activity

Factors That Impact Your Credit Score:

  1. Applying for Credit: A ‘hard’ search negatively affects your file, so limit credit applications.
  2. Multiple Addresses: Frequent address changes may impact your credit score negatively.
  3. Age of Your Accounts: Stability is reflected through the age of your accounts; newly opened accounts can lower your score.
  4. Missing Payments: Late payments and defaults harm your credit score; repay any debt, even if late.
  5. Credit Limit Usage: Using a large portion of your credit limit can adversely affect your score; aim for under 30%.
  6. Public Records: County Court Judgments, bankruptcy, or arrangements impact your report and deal availability.
  7. Errors: Check for mistakes and dispute any inaccuracies promptly.
  8. No Credit History: Establishing credit history is essential; consider a credit builder card.

Credit Issues: Not All Equal:

In the eyes of the lender – yes. Not all credit issues are equal. For example, most lenders are likely to look more favourably on a missed phone bill than bankruptcy. 

0-12 months1-2 years2-3 year3-4 years4+ years
Mortgage arrearsnomaybeyesyesyes
CCJsnonoyesyesyes
Defaultsmaybemaybeyesyesyes
Reposessionsnonononomaybe
Late paymentsyesyesyesyesyes
Debt management plannomaybeyesyesyes
IVAnonomaybeyesyes
Bankruptcynonononomaybe

Can you get a mortgage with bad credit? 

This is a very common question and the answer is, well… it depends. Some lenders will judge the severity of your credit issues and assess how you measure up when it comes to other eligibility and affordability criteria. If you have been previously been declined a mortgage based on your credit, we recommend focusing on rectifying any issues or errors carefully.

Improving Your Credit Rating: Top Tips

  • Check your credit reports will all three agencies and make sure all the information is accurate.
  • Dispute any inaccurate information. The agency has 28 days to address the incorrect details and during that time it will be marked as ‘disputed’ on your report and lenders can not rely on this. 
  • Reduce any debt you owe.
  • Pay all your bills on time and set up alerts for yourself if necessary
  • Don’t apply for or open credit accounts just for the sake of it.
  • Be aware that closing an account doesn’t make it disappear from your credit report.
  • Register on the electoral roll.
  • Consider a credit builder card, specifically if you have little credit history

For additional assistance or advice on credit scores and reports, contact PropertyPal Mortgages on 028 90 999 999 or email mortgages@propertypal.com .

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

PropertyPal Mortgages Ltd, registered in Northern Ireland at Unit 2D, Jennymount Business Park, North Derby Street, Belfast, BT15 3HN (NI632933). PropertyPal Mortgages Ltd is an Appointed Representative of PRIMIS Mortgage Network. PRIMIS Mortgage Network is a trading name of First Complete Ltd which is authorised and regulated by the Financial Conduct Authority for mortgages, protection insurance and general insurance products. The Financial Conduct Authority does not regulate some forms of Buy to Let.

PropertyPal Mortgages Ltd and First Complete Ltd are not responsible for Estate Agency or Legal services.

The guidance and/or advice contained within this website is subject to the UK regulatory regime and is therefore primarily targeted at consumers based in the UK.

(Visited 86 times, 1 visits today)

Last modified: 04/12/2023

Close