Paying attention to the way you manage credit can make a dramatic difference to your chances of getting approved for a mortgage.
That’s according to Jacqueline Dewey, managing director of free-for-life credit report service Noddle, who has offered tips to help potential borrowers make themselves a more attractive prospect to mortgage lenders.
She said saving up for a deposit and having a steady salary are important, but lenders also want to see you have a history of being able to manage credit and pay it back in time.
This means your credit report needs to be in good shape when you make the application so it’s important to check it first.
Read your credit report
Dewey said: “Look at your credit report to see what a lender will see. Look for and dispute any inaccuracies, such as lines of credit that you don’t recognise, incorrect personal details or an incorrect financial associate.”
She added: “Noticing something inaccurate in your report and getting it corrected can make a quick and impactful change to your score.”
If your credit score is poor because of your own financial behaviour it can take at least six to nine months to improve. While there are no quick fixes, you can think ahead and give yourself time to boost your score enough.
Dewey said: “While you can’t change anything that has already happened, you can ensure your financial behaviour going forward makes you an attractive prospect for a mortgage.”
Use credit
You can also impress lenders by actually using credit. Although it sounds counterintuitive, borrowing a little on a credit card, for example, and then paying it off straight away is a good way to prove to lenders you are responsible with credit, Dewey explained.
She advised using pre-existing lines of credit such as your credit card or mobile phone contract and to consider carefully before taking out any new borrowing products.
Dewey explained: “This is the time to demonstrate to lenders you are responsible and can pay back any forms of credit on time each month.
“This may mean that you don’t open any new lines of credit or that you are extra organised about paying off new agreements.”
Pay off debts
Potential borrowers can also make themselves more attractive to lenders by paying off big debts they may hold.
According to Dewey, if you have lots of debt and it’s of high value, lenders might think you are not able to take on any more credit.
“Pay off as much debt as you can before applying,” said Dewey, to give you a healthy income-to-debt ratio.”
Do your research
When looking at signing up to any financial product it’s important to do your research and mortgages are no exception. Dewey said it’s the biggest financial commitment you will make so it’s essential to shop around.
“Compare rates offered by different providers, plus associated fees and terms. The extra time you put into search may be very rewarding,” she added.
