“It’s a nice day today dear, let’s go out and get a Mortgage so we can buy a house!” is a phrase I am fairly certain has never been said in any household!
Buying a home, whether it is your first or a subsequent move, or maybe even just a remortgage, is something that requires both thought and planning.
But how many really think of the implications of having a less than perfect credit profile?
I see many credit files across my desk over the course of a month. Some are good, some have a few minor blips and there are some where you take one look at the file and think ‘Oh dear, this is going to be tricky!’
As a matter of course, I will always insist on seeing a clients credit file from CheckMyFile. This is in my opinion the most complete credit profile available giving the detailed reports from Experian, Equifax, TransUnion (formerly Call Credit) and Crediva. Whilst you can obtain the reports from these providers individually and they will give a rough guide. You have to bear in mind that all lenders will use different reports and by having sight of all the main reports in one it allows for a thorough oversight of any possible issues that may arise.
So, what can you do to improve your Credit Profile? Here are my top ten tips to help you improve your profile.
Only apply for credit when there is no other alternative! If you apply for more than four forms of credit in a year it can have a detrimental effect on your overall score. Rule of thumb, keep credit applications to a minimum.
Close old Credit Card accounts and cancel defunct Direct Debit Mandates, they will have an effect on your profile if they are seen as still active.
Pretty obvious this one, but pay ALL of your bills on time! Even one day late can have a negative impact with certain mail order companies.
Are you on the electoral roll? This is actually VERY important to enhance a good credit rating.
When you have obtained your credit file from CheckMyFile read through it to make sure that all the credit details are relevant and up to date and above all else they refer to YOU!
Be sensible about your credit card limits! I often have clients proudly announcing that all five of their credit cards have £15,000 limits and they have no outstanding balances. It is only when I explain that an underwriter would probably view this as an ability to go out and spend a further £75,000 which in turn would likely mean repayments of a further £2,250 a month and the impact that would have on affordability of their new mortgage, do they begin to see the problem. In short no one really needs more than two credit cards with a maximum of £5,000 limit if that!
Still on credit cards, try to keep your spending to a maximum of 75% of your limit. If you go over your limit, most card providers will issue penalty charges.
If you have recently split up with a partner, it is good practice to end any financial association with said partner. Their credit rating will not affect yours, but a jointly held credit agreement can and will affect yours!
Had historical credit problems? It may be worth your while looking at offerings from specialist credit card providers who help if you have had credit problems in the past. I would add that this is not carte blanche to go out and spend, spend, spend, but sensible usage of a credit card ie paying the FULL balance each month will help in proving that you are responsible with credit.
Be VERY careful in being pushed into getting a Decision in Principle (DIP) by an Estate Agent unless you have had an offer on a property accepted and then remember, you do NOT have to use the agents own in house adviser, you are at liberty to speak to any Mortgage Broker of your choice. Although many lenders only carry out a ‘soft’ credit search a DIP may well leave a ‘hard’ footprint on your credit file which will be visible to lenders. Too many footprints on your file in a short period of time will damage your overall profile!
It is a good rule of thumb to make sure that you check your credit file on a regular basis and following the above guidelines will help to smooth your way to a successful mortgage application!