If you would like to buy a house of your own but are worried about your credit rating, you’re not alone. There are plenty of individuals who are unsure of how to proceed with applying for a mortgage, especially if their credit rating is not too good. Lenders will definitely check out your credit rating, among other aspects such as your income, expenses, and so on. If you think that you have a poor credit rating, there’s no reason to give up just yet. Here’s how to properly build on your credit rating when you want to get mortgage approval.
The basics of credit ratings
Your credit rating will be based on the information which is in your credit file or report, and your report can help lenders decide whether they will allow you to borrow for a mortgage, how much they will allow you to borrow, and the amount of interest you will be charged. Whilst the latest information on your file or report will often have the biggest impact since lenders will be more interested in your existing situation finance-wise, any actions you have made in the past 6 years will still be in your record.
If your report shows some missed credit card payments or loan payments, your mortgage application could still be approved, although lenders may choose to charge you a higher interest rate.
First, check it
If you want to enhance your credit rating, you should first know what is in it. You can easily check your credit rating through 3 main agencies, namely Equifax, Callcredit, and Experian. For around £2, you can request a complete credit report which will be sent to you in written form.
There is a lot of information which can be found in your credit report, and this includes general information such as your name, your address, and your birth date, as well as any applications for credit you have filed. Other information includes financial relations to other individuals (such as if you have a joint bank account or joint loan), whether you have any missed or late payments, if you owe money to other lenders and how much, if you have ever entered an Individual Voluntary Arrangement (IVA) or been declared bankrupt, if you have any CCJs or County Court Judgments, and if you are listed on the electoral register.
Improving your rating
If you would like to improve your rating, know that this may take some time. But there are some actions which you can perform so your credit score will not be too negative. For instance, you can ensure that your name is on the electoral roll, and you should also start paying your bills, especially your Internet and telephone bills, on time. Ideally, if you have any outstanding debts, you should pay these off as soon as possible as well.
If you are keen on getting a mortgage whilst still having bad credit, you can also apply for a bad credit mortgage, which is specifically offered to those who have a low rating or score or a bad history of credit, as confirmed by the mortgage specialists at Mortgage Wise.