Improve Your Credit Score for a Mortgage in the UK
Understanding the status of your credit score for a mortgage in the UK is key. 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. But how do you ensure your credit rating is in good health, and what can you do to build it up?
How do credit scores work?
A credit score is a number that signals to lenders how reliable you are to lend to. It essentially shows how worthy of credit you are.
A credit score is assigned to you by Credit Reference Agencies. 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.
All this information is stored on your credit file, which has information going back 6 years. It’s this information that informs your credit score. Your credit report also shapes how much interest you’ll pay. When you’re trying to get a mortgage, the first hurdle is being accepted and the second is being accepted for a mortgage without sky high interest rates.
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 is the most popular credit scoring agency and is used by many lenders across the UK. Mortgage providers such as Molo Mortgages use Experian to check your eligibility.
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 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. Credit builder app Pave will also show its Pave Plus members their TransUnion credit score in the app.
Can I check my credit report for free?
You can use any one of the big three to check your credit 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.
You can have a 360 analysis of how lenders see your credit file using Pave's Credit Spotlight tool.
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.
Register on the electoral roll
The simple act of registering on the electoral roll can have a positive impact on your credit score. It lets lenders prove you are who you say you are quickly – which means you’re less risky to lend you.
Use a credit-builder
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. It’s important to bear in mind that different lenders all have their own criteria when deciding who to lend to, so if you aren’t accepted by one provider don’t feel that all is lost!
Our mission at Pave is to eliminate financial inequality and give people a fair chance to go as far as they can. Our credit builder is active, not passive, it works every single month on your behalf. We do this by offering the proper path to good credit.