Everyone wants to be excellent
Credit scores are a fundamental part of getting a mortgage. Not only do they affect how much you can borrow, but they also dictate how much you’ll pay each month for the repayments. That’s because people with a higher credit rating have access to lower interest rates.
You can probably guess by now that having a good credit score is vital to accessing the best mortgage deals. If your rating could be better, then you’ll need to improve your credit score for a mortgage. But how do you ensure your credit is in good health, and what can you do to build it up?
We’ve put this guide together, detailing everything you need to know about boosting the numbers on your credit report before buying a home. From learning to utilise credit to getting registered on the electoral roll, here are our top tips for a higher score.
How do credit scores work?
There are three primary credit referencing agencies to improve credit score in the UK– Experian, Equifax and TransUnion. They all use your personal banking information to better understand how well you manage your finances, with a specific look at your ability to handle credit.
After reviewing your profile and financial activities, they assign you a credit score. This is a single number that decides whether you can get things like a mobile phone contract, credit card and, of course, a mortgage. Your credit report also shapes how much interest you’ll pay. That last one is significant, as it’ll play a major role in how much you pay each month for your mortgage.
When you get a mortgage, the lender performs a credit check by using one of the three main agencies to access your score. A lower credit score doesn’t necessarily mean you can’t get a mortgage, but the products and rates available won’t be as appealing as those available for people with high scores.
How do I check my credit score?
Experian
Experian is the most popular credit scoring agency and is used by many lenders across the UK. It’s also the only company that boosts your credit score instantly when you connect a bank account. We also use Experian at Molo when we’re performing a credit check to see your eligibility for a mortgage.
Equifax
Equifax is the second-largest credit scoring agency and provides you with a score between 0-700. Anything from 466 upwards is considered excellent with Equifax, though the report will give you an exact indication of the quality of your score.
TransUnion
TransUnion isn’t as big as the other two agencies, but it’s still a recognised score provider in the UK. It scores you between 0-710, with anything above 628 considered excellent. TransUnion was formerly Callcredit, but was bought out by the American-owned company.
Can I check my credit report for free?
If you want to improve your credit score for a mortgage, the good news is that you can use any one of the big three to check your report. They offer a basic free service that shows your credit report, though you can also opt for paid packages that give you deeper insights into your credit rating. With three credit scoring agencies, there’s no such thing as a universal credit score.
Other companies, such as ClearScore and Credit Karma, also offer credit reports. They use one of the three credit reporting companies and provide a free service along with lending options based on your credit report.
How can I improve my credit score?
Make sure your information is correct
The first thing you should do is check to see if the information on your file is correct. Make sure that bank accounts, loans and credit cards are listed and show the correct payments. If any of the information you see is wrong, you’ll need to contact the credit referencing agency to rectify the mistake. You should also cross-reference to see if things like the address history is correct and up to date.
Ensure payments are on time
Credit score companies want to see that you can manage credit responsibly. One way of doing that involves making regular payments on time. This will show credit scoring agencies that you can handle your debts and manage credit. Consistent payments made on time can really help build your credit report.
Don’t use too much credit
Lenders may well raise an eyebrow if it looks like you use lots of unsecured credit, be it credit cards, overdrafts and small loans. People with a high amount of unsecured debt look like they can’t manage money and are living beyond their means. Being in such a scenario won’t bode well for your score.
But also don’t use too little
Even though you shouldn’t use too much credit, you still want to show that you can manage it. In an ideal world, you would use less than 50% of your credit. This way, you’re still displaying an ability to use credit and manage it without issues, but you don’t have a high amount of credit owed.
Register on the electoral roll
The simple act of registering on the electoral roll can have a positive impact on your credit score. Lenders see registering to vote as a positive sign when they decide whether or not to lend. And if you’re wondering why it’s because confirming your identity is easier, and being registered is seen as a sign of stability.
Closed unused accounts
There’s no point leaving unused accounts on your credit score, as they can impact your overall rating negatively. Close accounts you don’t use and consider consolidating multiple debts into just one credit card. There are plenty of interest-free balance transfer credit cards aimed at helping you manage your debt with just one card.
Use a credit-building website
Fortunately, resources are available to help you build your credit score and attain better mortgage interest rates. By using a company that works with major credit reference agencies, you can increase the number on your credit report and save money in the process, thanks to expert advice designed to help you reach your money goals, such as getting a mortgage with a good credit score.
A winning credit report
Improving your credit score needn’t be something to fear, and even with a lower report than you would like, all is not lost. Making small changes here and there and keeping on top of the latest reports regarding your score can help you build that number up and access lower interest rates and better mortgage deals. Once you’ve done that, you can find the right mortgage for yourself and start an exciting journey on the road to homeownership.
