Many FTBs may not get mortgages in 2015 due to credit issues

Many people hoping to get on the property ladder this year have unsorted credit issues which could stop them from getting a mortgage.

As many as 1.81 million potential first-time buyers have missed credit repayments, defaulted accounts and country court judgements for debt currently listed on their credit report, new research from Experian shows.

The survey also revealed that many people are unaware they might have a problem with their records, since 75 per cent of those polled were convinced they have a good or excellent credit history.

Even though 87 per cent of the people believe that a good credit history is important for their future finances, more than half (51 per cent) of them have not reviewed their credit reports recently.

Would-be first-time buyers were found to be twice as likely to pay back only the bare minimum of their monthly card borrowing as compared to the general population.

While 37 per cent of the people have taken out additional loans in the last six months, just 29 per cent have checked what they have to repay on credit and store cards in the past year.

All of these issues with credit and debts could make many lenders wary and they would be less likely to approve a mortgage application.

Although the market now is perfect for buying, with property numbers increasing and lenders offering rock-bottom interest rates, lenders would still check all records thoroughly, Julie Doleman, managing director of Experian Consumer stresses.

“If you’re looking to purchase a property in the near future, take time to understand what lenders are looking for and how to manage your current credit in a way that paints the best picture of your financial situation before you make your application,” she advises.

Experian pinpoints the five things people looking to buy their first home should do before applying:

1. Review your credit record, contact your credit reference agency if you have enquiries.
2. Do not apply for any other credits in the six months before you apply for a mortgage.
3. Save money: Since the introduction of the mortgage affordability rules last year lenders assess personal finances and budgeting as well.
4. Bring down your credit usage. Lenders will compare how much credit you used a year ago to see whether you now use more or less.
5. Meet all your agreed current repayments and pay more than the minimum on your cards.